Supreme Court to Consider Challenge to Government’s Plan for Extended Student Loan Relief

January 13, 2025 TruthUSA

The Fifth Circuit determined that the U.S. Department of Education did not have the legal power to facilitate challenges for borrowers contesting repayment obligations.

The U.S. Supreme Court has decided to hear the federal government’s appeal regarding a lower court’s decision that halted the expansion of defenses available for student loan borrowers aiming to contest repayment.

Colleges have filed a lawsuit against the U.S. Department of Education over a regulation that permits students who have been defrauded by their institutions to seek student loan forgiveness. Many borrowers contend that their schools misled them through unethical recruitment strategies or by overstating job placement rates after graduation.

The court granted the government’s petition in the case of U.S. Department of Education v. Career Colleges and Schools of Texas on January 10, with no justices dissenting. The court did not provide an explanation for its decision, and oral arguments for the case are yet to be scheduled.

A trade association, the Career Colleges and Schools of Texas, filed suit against the federal government, claiming it exceeded its legal authority. The U.S. Court of Appeals for the Fifth Circuit sided with the association, issuing an injunction to halt the program.

According to the petition, the federal Higher Education Act of 1965 allows a federal student loan borrower to contest repayment obligations if the borrower’s institution engages in misconduct.

The law mandates that the Department of Education must “specify in regulations which acts or omissions by an institution of higher education a borrower may use as a defense against loan repayment.”

For years, the department has permitted borrowers to raise such defenses to repayment claims, both directly with the agency and throughout the formal collection process.

The department asserted that the contested rule clarifies the procedures it employs when evaluating requests for repayment relief, noting that the need for clarification arose due to processing backlogs.

On April 4, 2024, the Fifth Circuit ruled that the association demonstrated it would suffer irreparable harm from the program and was likely to prevail in its case. As a result, the circuit court issued a nationwide injunction preventing the department from enforcing its rule.

According to the court, the member schools of the Career Colleges and Schools of Texas suffered injury from the department’s regulation, which modified the regulatory provisions regarding student-loan discharges linked to the actions, omissions, or closures of higher education institutions.

U.S. Solicitor General Elizabeth Prelogar argued for granting the petition, asserting that the department possesses the authority to “compromise, waive, or release any right, title, claim, lien, or demand” related to its loan portfolio management.

The federal Education Act explicitly “authorizes the [department] to cancel or reduce loans” under “certain limited circumstances,” as the Supreme Court determined in Biden v. Nebraska (2023).

In that decision, the Supreme Court invalidated President Joe Biden’s controversial initiative for partial student loan forgiveness, which was unveiled in August 2022. Critics labeled this effort as a constitutionally questionable strategy to support Democratic candidates in the November 2022 congressional elections. The Congressional Budget Office estimated that this plan could cost approximately $400 billion, while the Wharton School projected it might exceed $1 trillion.

In a brief, the Career Colleges and Schools of Texas contended that the petition should be denied, asserting that the Fifth Circuit had ruled correctly.

There is an absence of discrepancy among the federal appellate courts concerning the department’s legal authority, and the brief argued that the rule “is improbable to be maintained, let alone defended by the incoming administration.”

Following Biden, President-elect Donald Trump will assume office on January 20.

The Fifth Circuit was correct in finding that the challenged rule “exceeds the Department’s statutory authority in several respects and imposes biased procedures and assumptions that do not aim to establish the truth, but rather to achieve the Department’s explicit goal of ‘increasing the number of borrowers who receive forgiveness,’” the brief stated.

Career Colleges’ attorney, Stephen Kinnaird of Paul Hastings in Washington, opted not to comment on the case.

The Epoch Times reached out for a statement from the U.S. Department of Justice, representing the Department of Education, but there was no response prior to publication.

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