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Wednesday, June 19, 2024 | Back issues
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For-profit colleges join dogpile opposed to student loan forgiveness

Challenges to President Joe Biden’s actions on student loan debt are already before the justices, but for-profit colleges are asking the high court to create more roadblocks to the relief plan.

WASHINGTON (CN) — Colleges hit with misconduct claims over their for-profit status are the latest to arrive at the Supreme Court's steps over the Biden administration’s actions to cancel student loan debt. 

Whereas the court is already reviewing a challenge to the use of a post-9/11 law to cancel $10,000 in debt from certain student loan borrowers using a post-9/11 law, the emergency application submitted Wednesday to Justice Elena Kagan takes a different tack: complaining that the use of the Higher Education Act to cancel student loan debt is an abuse of authority. 

It was brought by Lincoln Educational Services and American National University, both of which are for-profit entities, and by Everglades College, whose status as not-for-profit was questioned by Congress last year after the school’s president was alleged to have received millions of dollars in alleged violation of Education Department rules.

“The Secretary’s claimed authority amounts to nothing less than the power to cancel, en masse, every student loan in the country,” Jesse Panuccio with Boies Schiller Flexner wrote in an application for the universities, referring to the head of the Department of Education. 

Panuccio notes that the program in question diverges from the administration’s actions under the Higher Education Relief Opportunities for Students Act of 2003, but that this case could moot the question already before the justices. 

“If the Secretary is correct, the pending decisions in Nebraska and Brown could be rendered potentially irrelevant,” Panuccio wrote. “After an adverse decision from this Court, the Secretary could turn around and cancel the same debts under his claimed HEA authority.” 

Before Biden took office, over 160,000 student loan borrowers sued the Education Department in 2019, claiming the government had failed to process their borrower defense claims — an application that can be filed with the department if a student feels their university has engaged in misconduct. The class action suit alleged that students had their credit damaged because of the government’s inaction on the claims. 

A settlement was in the works in 2020. Under former Education Secretary Betsy DeVos, the department said it would respond to the requests within 18 months. A year later, DeVos was ordered by a federal judge to testify in the class action over the long delays and mass denials of student debt relief claims. U.S. District Judge William Alsup said there was evidence that the department acted in bad faith when delaying the processing of borrower defense claims. 

Before DeVos could testify, however, a divided panel on the Ninth Circuit rebuked Alsup’s ruling, finding that it would violate separation of powers principles to force testimony from cabinet members — even if they are no longer holding office. 

The students then claimed the Education Department had adopted a presumption of denial policy for borrower defense claims and asked for an order forcing the court to hand down a decision on the merits of their claims. 

Settlement talks advanced in 2022, with both parties filing for preliminary approval. At the same time, however, the department also moved for summary judgment on the basis that there was no longer a need for relief because it had already been provided. 

Everglades, Lincoln and American National moved to halt the suit once the students and government agreed to a settlement. They claimed the Education Department did not have the authority to provide the relief it agreed to in its settlement, and the settlement would violate the Administrative Procedure Act as well as the universities’ due process rights. 

Overruling the universities’ objections, a federal judge granted final approval of the settlement. The schools have appealed the ruling but claim the Supreme Court must intervene because the government plans on acting sooner rather than later. 

“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,” Panuccio wrote. “Accordingly, the schools seek a stay pending a writ of certiorari.” 

The universities allege the settlement denies them their due process rights while removing their administrative rights. They also claim the agreement will expose them to new liability. 

According to the universities, the department is using two provisions under the HEA both to cancel student debt and to refund prior payments to 200,000 students at 151 institutions. The schools say this also creates a new process for examining additional borrower defense claims. 

“The Secretary’s claimed authority to provide not just $10,000, $17,500, or $40,000 in debt relief for some professions, or full relief in a handful of circumstances, but full discharge in all circumstances — and refunds of past payments — renders these carefully calibrated grants of specific authority impermissibly superfluous,” Panuccio wrote (emphasis in original).

Everglades says the administration is incorrectly reading HEA’s statutes and that its proposed plan would require specific authorization from Congress. But even if the department was authorized to create such a plan, the universities claim the government did not follow the appropriate steps to do so. 

“Even if the HEA granted the Secretary the authority to establish a program of en masse loan cancellation and refunds — and the major questions doctrine confirms Congress did not — at minimum, creation of such a farreaching, detail-laden program would require formal rulemaking,” Panuccio wrote.

The Department of Education did not respond to a request for comment on the case. 

Follow @KelseyReichmann
Categories / Appeals, Consumers, Education, Financial, National

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