The United States Supreme Court (SCOTUS) on Thursday rejected an emergency application from three colleges that asked to stop a $6 billion borrower defense settlement, which will discharge more than $6 billion owed by approximately 200,000 borrowers.
Earlier this month, three colleges — Everglades College, Lincoln Educational Services Corporation, and American National University — filed an emergency application to SCOTUS asking it to halt a $6 billion student loan debt settlement. While ED started discharging loans for many borrowers in the settlement, relief was halted for borrowers from those three colleges due to an appeal filed in January.
In the emergency application to SCOTUS, the colleges argued that Education Secretary Miguel Cardona has abused his authority to use the Higher Education Act (HEA) to cancel those borrowers’ student loan debt. Specifically, they wrote “the Secretary’s claimed authority amounts to nothing less than the power to cancel, en masse, every student loan in the country.”
That emergency application was in response to a settlement in the Sweet v. Cardona case, a class action lawsuit that 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. Everglades College, Lincoln Educational Services Corporation, and American National University were part of the list of 151 institutions.
Earlier this week, 20 GOP-led states filed an amicus brief to SCOTUS in support of the emergency application, arguing also that Cardona abused his authority under the HEA and that the borrower defense program operates on a "case-by-case basis and affords due process to all interested parties.” That means that the borrower defense program cannot grant mass cancellations, the states argued.
But on Thursday, SCOTUS rejected that effort. The application was submitted to Justice Elena Kagan, who handles emergency matters coming from the 9th Circuit. The application was then presented to the whole court, and at least five of the justices rejected the application, according to POLITICO.
On Wednesday, the Biden administration responded in a brief for SCOTUS to reject the emergency application. Solicitor General Elizabeth Prelogar wrote that Cardona is “empowered to compromise and settle claims, including by waiving or releasing rights to repayment.”
She noted that the HEA grants the secretary of education authority to “enforce, pay, compromise, waive, or release any right, title, claim, lien, or demand, however acquired” for both Federal Family Education Loans and Direct Loans.
Prelogar’s response also contained updated numbers about which borrowers have already had their loans discharged as part of the settlement. As of Tuesday, April 11, approximately 78,000 borrowers of the 196,000 borrowers eligible for automatic relief had their loans discharged. Approximately 3,800 borrowers who attended Everglades College, Lincoln Educational Services Corporation, and American National University are eligible to get their loans discharged. Prelogar added that ED has discharged loans for about 400 of those 3,800 eligible borrowers, but it halted those discharges on April 6 when the three colleges filed their emergency application to SCOTUS.
The Project on Predatory Student Lending at the Legal Services Center at Harvard Law School, which co-represents the plaintiffs on the Sweet v. Cardona settlement, on Wednesday also announced that borrowers of the settlement filed a brief with SCOTUS in response to the three colleges’ emergency application. On Thursday evening, Eileen Connor, president of the organization, responded to the rejection of the three colleges’ emergency application.
“Today’s swift and decisive action from the highest court should end, once and for all, any ongoing debate about the legitimacy of this settlement,” Connor said in a statement. “The message is clear: the rights of student borrowers will not falter, even in the face of well-funded, politically-motivated attacks masquerading as legal argument.”
Publication Date: 4/14/2023