Three Institutions Ask SCOTUS to Halt $6 Billion Student Loan Debt Settlement

By Maria Carrasco, NASFAA Staff Reporter

Three institutions on Wednesday submitted an emergency application to the United States Supreme Court (SCOTUS), asking it to halt a $6 billion student loan debt settlement and arguing that Education Secretary Miguel Cardona has abused his authority to use the Higher Education Act (HEA) to cancel those borrowers’ student loan debt. 

The emergency application was submitted in response to a settlement in the Sweet v. Cardona case, a class action lawsuit that was first filed in 2019 against the Trump administration. The settlement stipulates that the Department of Education (ED) will discharge more than $6 billion owed by approximately 200,000 borrowers who collectively attended 151 institutions and said they were defrauded by their schools. 

While ED has begun discharging debt for many of the borrowers included in the settlement, relief was halted for a subset of borrowers who attended the three institutions — Everglades College, Lincoln Educational Services Corporation, and American National University — that filed an appeal in January.

Just last week, the Ninth Circuit Court of Appeals rejected that effort. The court in its ruling wrote that the three institutions failed “to demonstrate a sufficient probability of irreparable harm to warrant a stay of the challenged settlement pending these appeals.”

But that appeal is still pending, so in early summer the Ninth Circuit Court of Appeals will consider more arguments and responses.  

In their application to SCOTUS, the institutions argue that the HEA allows ED to cancel student debt in “statutorily defined circumstances,” for reasons such as a borrower’s death, total and permanent disability, bankruptcy, or school closure. However, the schools claim that Cardona has exceeded his authority.   

“The Secretary’s claimed authority amounts to nothing less than the power to cancel, en masse, every student loan in the country,” the application states. “The Secretary has never identified any principled limit to his claimed authority, because every federal student loan represents a ‘right’ to repayment that the Secretary allegedly can ‘compromise’ or ‘waive.’”

The institutions asked SCOTUS to consider the case and halt the settlement from discharging the borrowers’ debt, at minimum until the court decides on President Joe Biden’s student loan debt relief plan, which would cancel up to $20,000 of student loan debt for eligible borrowers. 

The three institutions claim that the Supreme Court must consider this case on an accelerated timeline because ED has already begun the steps of discharging the student loan debt of borrowers who filed borrower defense claims against the three institutions. 

“They have sought orderly appellate review, but the Department has announced it will effectuate the settlement immediately, rather than on the year-plus timeframe established by the settlement,” the application states. 

The Project for Predatory Student Lending at the Legal Services Center at Harvard Law School, which co-represents the plaintiffs on the Sweet v. Cardona settlement, said last week’s decision by the Ninth Circuit Court of Appeals means that ED can move forward with settlement relief. Borrowers who submitted a borrower defense claim against one of the 151 institutions will receive automatic relief and ED will notify them by April 28, 2023. 


Publication Date: 4/6/2023

David S | 4/6/2023 1:27:53 PM

Darren, do you believe that the government should have no system in place to identify those who are using taxpayer funds in a fraudulent manner, and take no action when this is discovered? My perspective on this is in part from having served on the 2016 DTR Negotiated Rulemaking committee; there have been many cases of undeniable, blatant fraud. That bothers me as a taxpayer, but perhaps even more so as a financial aid professional, because that type of behavior erodes the public trust in both higher education and publicly funded financial aid programs. So for cases of fraud, yes, we do have a solution, and this is it. This is the system working as it's designed, for students and taxpayers.

Iliana G | 4/6/2023 12:33:55 PM

This claim is so ridiculous, these institutions did wrong, they don't get to dodge a bullet by waiting.
Their claim is basically I shouldn't get charged with assault, because that person is dying of totally unrelated reasons. NO! You did wrong, and should suffer the full consequences of your actions.

Darren C | 4/6/2023 12:33:49 PM

These three institutions work in the system created by the Government. Then the Government decides which schools defrauded students and wants them to give up $6 billion. Of course we don't have all the details to what happened in this situation, nor will we ever. So much has happened behind the scenes. There are failings in many places here, but people love to pick sides because of political bias and fight for one over the other. When that is the case, we will never truly find a solution. Status quo.

David S | 4/6/2023 10:31:07 AM

“The Secretary’s claimed authority amounts to nothing less than the power to cancel, en masse, every student loan in the country,” is a completely false statement. Defense to Repayment is in the law, and longing for the 2017-2021 era with an administration led by someone who paid a $25M settlement for defrauding students doesn't change that. Secretary Cardona absolutely has this authority, as well as an obligation to the defrauded students and taxpayers.

We're now seeing attacks on the needy students our profession is sworn to assist, much of it based on politics and/or corporate greed.

You must be logged in to comment on this page.

Comments Disclaimer: NASFAA welcomes and encourages readers to comment and engage in respectful conversation about the content posted here. We value thoughtful, polite, and concise comments that reflect a variety of views. Comments are not moderated by NASFAA but are reviewed periodically by staff. Users should not expect real-time responses from NASFAA. To learn more, please view NASFAA’s complete Comments Policy.

Related Content

Biden Administration Extends Loan Consolidation Deadline to Get Credit for Loan Forgiveness


Today's News for May 16, 2024


View Desktop Version