On Thursday, the U.S. Supreme Court declined to stop a legal settlement between the U.S. Education Department and former college students that would eliminate over $6 billion in debt. Many students attended for-profit institutions and claimed the schools about academic programs and job prospects deceived them. Three colleges, including for-profit Lincoln Educational Services Corp, American National University Inc, and nonprofit Everglades College Inc, challenged the settlement connecting them to "substantial misconduct," but the Supreme Court rejected their request. The payment will grant automatic loan discharge to about 3,500 borrowers who attended the three schools. This decision is unrelated to the ongoing case regarding President Biden's plan to cancel $430 billion in student debt for 40 million borrowers, which is expected to have a ruling by June. The Education Department's class-action settlement will cancel the indebtedness of almost 200,000 borrowers who attended 151 schools.
Eileen Connor, who is the director of litigation at the Project on Predatory Student Lending, an organization representing borrowers involved in the settlement, has accused the schools of using aggressive sales tactics and making false claims about the quality of their academic programs, job prospects for graduates and networking opportunities to boost enrollment. According to Connor, the Supreme Court's prompt and decisive action should restate any further debates on the settlement's legitimacy and sends a message that student borrowers' rights will not be undermined by political attacks disguised as legal arguments.
In 2019, borrowers initiated legal action to compel the then-Education Secretary, Betsy DeVos, under President Donald Trump's administration, to resume the Education Department's adjudication of their misconduct allegations against the schools. After three years of litigation and a change in presidential administrations, the parties reached a settlement in June 2022, which resulted in the current loan discharges.
Last year, U.S. District Judge William Alsup, based in California, approved the settlement, and in February of this year, he dismissed the objections raised by the three colleges. The three schools then appealed to the 9th U.S. Circuit Court of Appeals in San Francisco, which, in March, refused to block the settlement from taking effect while their appeal was pending.
Twenty states with conservative leanings, led by Ohio, petitioned the Supreme Court to stop further loan discharges under the settlement, but the Court declined the request. In a court filing, the Biden administration informed the justices that as of April 11, approximately 78,000 borrowers had already received loan discharges.
The administration did not comment on the decision, and an attorney representing the schools did not respond immediately to a request for comment.
