WASHINGTON — An agreement that will allow thousands of student loan debts to be discharged will go into effect after the Supreme Court refused to block it Thursday.
The Supreme Court in a brief order denied a request made by the colleges challenging the agreement.
The case is unrelated to President Joe Biden’s broader effort to forgive student loan debt, which is also before the judges, with a ruling expected in the next two months.
The class action settlement concerns loans that borrowers say should be canceled because they were withdrawn based on misrepresentations made by their schools, many of which are for-profit. The deal could be worth more than $6 billion.
The case stems from a settlement that California-based US District Judge William Alsup approved in November in a case brought by the borrowers. The government has already begun to implement the agreement.
The Supreme Court application was filed by Everglades College, Lincoln Educational Services Corp. and American National University. Lincoln and American National are for-profit companies, while Everglades is non-profit. All three operate universities that the federal government placed on a list of more than 150 institutions that it said are linked to claims of «substantial misconduct.»
The schools are opposed to that characterization. The Justice Department says about 3,800 of the affected loans involve the three universities and about 400 of those have already been paid off.
The federal Higher Education Law allows debt cancellation in specific circumstances, but challengers say Education Secretary Miguel Cardona has exceeded his authority.
“The authority claimed by the secretary amounts to nothing less than the power to cancel, en masse, all student loans in the country,” the challengers said in court documents.
They asked the Supreme Court to stay Alsup’s ruling and consider speeding up the hearing of the case.
The Justice Department, representing Cardona, said in court documents that the agreement only involves the borrowers and the Department of Education. As a result, it «neither adjudicates any rights nor imposes any duties or responsibilities on the relevant schools» and there is no evidence that the schools have suffered any harm, the government lawyers argued.
Alsup rejected the associations’ request to delay the entry into force of their ruling, saying that their inclusion on the list of associations did not affect their rights or have any legally binding impact on them.
The lawsuit was filed in 2019, four years after the collapse of Corinthian Colleges, a for-profit organization, which led to thousands of borrowers filing claims to pay off their debt.
In separate cases related to Biden’s much larger debt relief plan, the Supreme Court in February was skeptical that it was legal.
The program, which would allow eligible borrowers to cancel up to $20,000 in debt, has been on hold since the US Court of Appeals for the 8th Circuit issued a temporary stay in October, and there are great doubts it will ever come into effect. validity.
That plan, which would cost more than $400 billion and affect more than 40 million borrowers, is significantly broader than the class action settlement.