Appeals court blocks new rule helping defrauded students get debt relief

An appeals court on Monday issued an injunction against a new Biden administration rule that made it easier for students defrauded by their schools to seek debt relief. Photo by Yuri Gripas/UPI
An appeals court on Monday issued an injunction against a new Biden administration rule that made it easier for students defrauded by their schools to seek debt relief. Photo by Yuri Gripas/UPI | License Photo

Aug. 8 (UPI) -- A federal appeals court sided with a group of Texas for-profit colleges and universities on Monday, blocking a recently enacted Biden administration rule that makes it easier for borrowers defrauded by their schools to receive loan relief.

The loss is the latest development in the Biden administration's fight to offer student debt relief to borrowers weighed down by the growing cost of higher education.


Late last year, the Department of Education finalized regulations that streamline rules for major debt relief programs, making it easier to erase debt for borrowers whose schools either closed or made substantial misrepresentations and whose loans were falsely certified, among other reasons.

The Biden administration was sued in February over the new rule, known as the Borrower Defense to Repayment Rule, by the Career Colleges and Schools of Texas, a trade association of more than 70 for-profit colleges and universities, who described it as an "enormous executive overreach" with the "apparent goals ... to accomplish massive loan forgiveness for borrowers and to reallocate the correspondingly massive financial liability to institutions of higher education."


Ahead of the rule going into effect July 1, the trade union requested a district court to put it on ice as its case moved forward, but was denied on the grounds that the regulation does not threaten any irreparable injury to its member schools.

It then appealed that decision late June, which was approved Monday by the conservative three-judge panel of the U.S. District Court for the Western District of Texas.

No reason for granting the injunction was given in the two-page decision. The judges, all appointed by Republican presidents, ordered for hearings to begin in the case Nov. 6.

The Biden administration has argued before the court in favor of the rule, saying the injuries that CCST may incur are "entirely speculative" and "insufficient to constitute irreparable injury attributable to the rule."

"Both Congress and the Department [of Education] have found it in the public interest to ensure that borrowers harmed by the misconduct of their schools can access debt relief," the Department of Education said last month in court documents arguing against the injunction appeal.

"The rule represents significant steps toward those goals, and the balance of harms thus tilts decisively against an injunction pending appeal."


UPI has asked the Department of Education for comment.

On the other side of the argument, trade union Career Education Colleges and Universities welcomed the Fifth Circuit court's decision.

"CCST's legal case against the Department of Education's unlawful BDR rule is strong and we are confident that when the case is brought forward the facts will show the new rule to be an agency overreach in violation of the department's authority, the Administrative Procedure Act and the Constitution," Jason Altmire, CECU's president and chief executive, said in a statement.

Eliminating student debt has been a priority for President Joe Biden, whose efforts to alleviate this stress on millions of borrowers has been stymied in litigation.

Late last summer, Biden announced a plan to cancel up to $20,000 of debt for Pell Grants holders and $10,000 for borrowers who earn less than $125,000 annually.

But it was met with litigation that weaved its way to the conservative-leaning Supreme Court, which in late June ruled against the plan on the grounds it was not approved by Congress.

Last month, the Department of Education announced plans to forgive $39 billion in student loan debt held by more than 804,000 borrowers.


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