Colleges Ask Supreme Court To Cancel Federal Student Loans Worth $6 Billion

A group of colleges has requested that the U.S. Supreme Court suspend a class-action settlement that could cancel student loans for hundreds of thousands of borrowers.

Colleges ask to halt $6 billion student loan debt. (Photo: NBC)

Colleges Asked Supreme Court to Halt Student Loan Debt Settlement

The case was filed by borrowers who allege that their federal student loans should be canceled because their schools, many of which are for-profit, engaged in misconduct. The class-action settlement, which could be worth more than $6bn, was approved in November by US District Judge William Alsup.

The challengers, which include Everglades College, Lincoln Educational Services Corp., and American National University, all operate colleges on a list of over 150 institutions linked with substantial misconduct, according to an article published in NBC News.

The colleges argue that the Higher Education Act permits debt cancellations in specific circumstances, but Education Secretary Miguel Cardona has exceeded his authority. They say his power amounts to “cancel, en masse, every student loan in the country.”

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What does the Group of Colleges Want?

The group wants the Supreme Court to put Alsup’s ruling on hold and to hear the case more quickly. Alsup had refused the colleges’ request to delay his ruling from going into effect, saying their inclusion on the list of colleges did not affect their rights or have any legally binding impact on them.

In a published article in Yahoo News, the lawsuit was filed in 2019, four years after the failure of Corinthian Colleges, a for-profit organization. Thousands of borrowers had filed claims seeking to discharge their debt in the wake of that collapse. The case is separate from President Joe Biden’s initiative to forgive student loan debt, which is also before the Supreme Court.

The ruling on this matter is expected within the next two months. Biden’s debt relief plan would allow eligible borrowers to cancel up to $20,000 in debt and has been blocked since the 8th US Circuit Court of Appeals issued a temporary hold in October. It is unclear whether it will ever go into effect. This plan is far more comprehensive than the class-action settlement and would affect upwards of 40 million borrowers at a cost of over $400bn.

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