A U.S. appeals court has blocked the Biden administration from enforcing a rule that would make it easier for people defrauded by their colleges or universities to have their student loans forgiven, saying key provisions were "almost certainly unlawful."
The New Orleans-based 5th U.S. Circuit Court of Appeals on Thursday at the request of a group representing for-profit colleges overturned a judge's decision and directed him to issue a preliminary injunction blocking the rule nationwide.
U.S. Circuit Judge Edith Jones, writing for the three-judge panel, said Career Colleges and Schools of Texas (CCST) was likely to succeed in proving the U.S. Department of Education overreached and lacked authority under the Higher Education Act to adopt the regulation.
She said the regulation "seems to be of a piece" with President Joe Biden's administration's efforts to sidestep the U.S. Supreme Court's June 2023 ruling barring it from canceling $430 billion in student loan debt for 43 million borrowers.
Through other initiatives, Biden's administration during his tenure has approved the cancellation of about $144 billion in student loans for almost 4 million borrowers.
The rule before the 5th Circuit was finalized in October 2022 and changed a program that allows students to seek debt relief if their schools mislead them. Students who have received debt forgiveness through the program have attended for-profit colleges including the shuttered Corinthian Colleges.
The Biden administration's rule made it easier for students to qualify for debt relief when they were misled by their schools to attend them or if their college shuttered before they could finish their studies.
But Jones, who like the other judges on the panel was appointed by a Republican president, said the regulation suffered from a "pantheon of legal problems" and "numerous statutory and regulatory shortcomings."
An Education Department spokesperson in a statement late Thursday said it was reviewing the ruling, saying the Higher Education Act clearly granted a path for borrowers to obtain relief when schools "ripped students off or greeted them in the morning with locked doors and a closure with no warning."
A lawyer for CCST, Stephen Kinnaird of Paul Hastings, did not respond to requests for comment.
A key part of the rule, its "borrower-defense" provision, allowed students to apply for a full discharge of their student debt if they had been misled by their schools.
But Jones in Thursday's ruling said that provision was inconsistent with the Higher Education Act, which only authorized providing borrowers a defense against repayment if they were sued for defaulting, not "affirmative 'claims' that borrowers can assert against schools to avoid their obligations."
The panel had previously postponed the rule’s effective date pending appeal, and in Thursday's decision, it directed a lower-court judge to block the challenged provisions nationwide over the objection of the Biden administration, which said any relief should only apply to CCST's members.
"The department's protests against nationwide relief are incoherent in light of its use of the Rule to prescribe uniform federal standards," Jones wrote.
The case is Career Colleges and Schools of Texas v. United States Department of Education, et al, 5th U.S. Circuit Court of Appeals, No. 23-50491.
For Career Colleges and Schools of Texas: Stephen Kinnaird of Paul Hastings
For the Education Department: Jennifer Utrecht of the U.S. Department of Justice
Read more:
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