US Court Blocks Bidens Debt Relief Rule for Defrauded Students

Last Updated on August 8, 2023 by Robert C. Hoopes

Headline: Federal Appeals Court Blocks Biden’s Proposed Student Debt Relief Rule

In a significant setback to the Biden administration’s plans for student debt relief, a federal appeals court has blocked a rule that aimed to make it easier for defrauded students to have their loans forgiven. The New Orleans-based 5th U.S. Circuit Court of Appeals granted an emergency injunction requested by the Career Colleges and Schools of Texas (CCST), a trade group representing for-profit colleges.

CCST is currently appealing a lower-court judge’s decision not to block the rule, which was finalized by the Education Department in October. The new rule sought to change an existing program that allowed students to seek debt relief if they were misled by their schools. It provided stronger grounds for borrowers to obtain debt relief in cases of fraud and established a procedure for the Education Department to forgive debt for groups of affected students.

It’s important to note that this rule is separate from President Biden’s broader student debt relief plan, which has faced its own challenges. In June, the Supreme Court prevented the administration from canceling $430 billion in student loan debt. As a result, the administration is now exploring alternative approaches to providing relief for student loan borrowers.

The Education Department has expressed its commitment to combating predatory colleges and ensuring relief for borrowers who have been cheated. It is currently reviewing the court’s order and considering its next steps in addressing the concerns raised by CCST.

Notably, students who have benefitted from debt forgiveness under the existing program attended for-profit colleges such as Corinthian Colleges and ITT Technical Institute. However, CCST argues that the proposed rule is unlawful and unconstitutional, suggesting that it aims to shift financial liability from borrowers to higher education institutions.

The three judges on the panel that granted the emergency injunction were all appointed by Republican presidents, further highlighting the political landscape surrounding student debt relief.

As the Biden administration faces hurdles in its pursuit of student debt relief, it remains to be seen how it will navigate these challenges and provide much-needed relief to a growing number of borrowers burdened by student loans.