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For-profit schools lose challenge to settlement with students

The Biden administration's settlement over misconduct claims against for-profit colleges will not be halted by the nation's top court.

WASHINGTON (CN) — The Supreme Court declined an emergency application Thursday seeking to halt a settlement that would cancel about $6 billion in debt for students who took out loans to go to for-profit universities.

The order offered no explanation for the denial and noted no dissents. 

For-profit colleges Lincoln Educational Services and American National University asked the justices to halt the agreement on the grounds that the Education Department exceeded its authority. Everglades College, which is classified as a not-for-profit, also joined the appeal. 

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

The government argued the automatic loan discharge served as a solution to the multitude of borrower-defense relief claims filed against for-profit institutions. 

“The settlement does not subject them to any liability, adjudicate their rights, or require them to do or refrain from doing anything,” U.S. Solicitor General Elizabeth Prelogar wrote in the government’s brief. “Instead, applicants principally assert that their reputations are being harmed by their inclusion on the list of schools whose borrowers are entitled to automatic relief.  But that purported reputational harm is speculative and would not be redressed by a stay in any event.” 

Student loan borrowers can file a claim with the Department of Education if they feel their university has engaged in misconduct. The department incurred claims in 2019 from over 160,000 student loan borrowers who say the department was not processing their borrower defense claims, leaving them with damaged credit. 

Former Education Secretary Betsy DeVos claimed the agency would respond to students’ requests within 18 months. U.S. District Judge William Alsup said the Education Department had acted in bad faith when processing these claims and ordered DeVos to testify concerning the long delays and mass claim denials. 

Before DeVos could testify, however, the Ninth Circuit reversed Alsup’s ruling. The divided panel said the testimony would violate separation of powers principles even though DeVos no longer held office.

Settlement talks moved forward last year while the Biden administration moved for summary judgment on the litigation, claiming the relief had already been provided. This is the point where the three universities that brought the application to the Supreme Court attempted to intervene. 

The institutions claimed the settlement violates the Administrative Procedure Act and their due process rights. Even so, a federal judge granted final approval of the settlement. 

The schools asked the Supreme Court to stop the department from releasing the settlement funds while their appeal continues. 

Everglades College said it was disappointed by the ruling but would continue to fight for relief at the appeals court.

“We are disappointed that the Supreme Court did not grant our application to stay," a representative for the school said in an email. "We believe strongly in the merits of our case and indeed 20 state attorneys general filed a brief agreeing with our position. While the Supreme Court did not stay the settlement, the appeal will proceed in the Ninth Circuit, where we will present our arguments in full.”

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

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