On Thursday, the US Supreme Court upheld a lawsuit settlement that would eliminate more than $6 billion in student loans.
Many of these institutions, many of which are for-profit, claim that colleges misled them regarding academics and employment opportunities.
Supreme Court Upholds $6 Billion Student Loans Settlement
Three institutions challenging a settlement between the U.S. Education Department and borrowers that linked them to severe misbehavior were denied by the justices.
After a California federal judge authorized the settlement in November, for-profit Lincoln Educational Services Corp, American National University Inc, and nonprofit Everglades College Inc contested it.
Over 3,500 debtors who qualified for an instant loan discharge under the settlement attended one of the three schools.
The top court’s ruling was unrelated to President Joe Biden’s promise to forgive $430 billion in school debt for 40 million borrowers.
A verdict in that lawsuit is expected by the end of June.
A class-action settlement required the Education Department to immediately forgive roughly 200,000 loans from 151 colleges.
Eileen Connor, director of litigation at the Project on Predatory Student Loans, which represents borrowers in the settlement, said the institutions utilized aggressive sales methods and misrepresented their academic offerings, graduates’ career prospects, and networking opportunities to encourage enrollment.
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Three Colleges Claiming Reputational Harm
The three colleges claimed reputational loss in court filings, comparing their inclusion on the settlement’s list to a scarlet letter.
They also argued the Biden administration lacked the legal authority to cancel the debt.
The settlement followed borrowers’ 2019 court effort to persuade then-Education Secretary Betsy DeVos, who served under President Donald Trump, to resume the Education Department’s adjudication of their misconduct claims against the colleges.
The parties achieved a settlement in June 2022, three years after the parties first filed their lawsuit and a change in the presidential administration.
US District Judge William Alsup, who is headquartered in California, accepted the settlement last year and dismissed the three institutions’ objections in February.
The three schools attempted to prevent the settlement from going into force while their appeal was pending, but the 9th US Circuit Court of Appeals in San Francisco rejected their request in March.
Ohio was one of twenty Republican-leaning states that had petitioned the Supreme Court to grant the schools’ request to halt additional loan discharges under the settlement.
The Biden administration informed the judges in a court filing that by April 11, over 78,000 borrowers had already had their loans dismissed.
An attorney for the schools did not immediately respond to a request for comment, and the administration declined.
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