Latest news with #BorrowerDefense
Newsweek
24-06-2025
- Business
- Newsweek
Student Loan Update: Supreme Court Resumes Case on Debt Forgiveness
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. The U.S. Supreme Court on Monday agreed to resume a case surrounding a Biden-era student loan forgiveness rule. Why It Matters Former President Joe Biden's promises to forgive student loans to borrowers across the country faced myriad legal challenges from critics who believed he lacked authority to unilaterally forgive loans, and that taxpayers should not foot the bill for borrowers. Proponents of student loan forgiveness, however, say student loan debt has become a major burden for borrowers who are struggling to pay it off for years or even decades. Biden's rewrite of the Borrower Defense rule to make it easier for borrowers to have federal loans forgiven if schools either defrauded them or closed faced a legal challenge from Career Colleges & Schools of Texas (CCST), a trade organization. The Borrower Defense rule has been in place since 1994 but was rewritten by the Biden administration in 2022 to make the process easier for borrowers who were defrauded by a college to have those loans forgiven before a default, Forbes reported. Activists hold "cancel student debt" signs outside the White House on August 25, 2022. Activists hold "cancel student debt" signs outside the White House on August 25, 2022. STEFANI REYNOLDS/AFP via Getty Images What To Know CCST challenged the 2022 rewrite over concerns that it could harm for-profit institutions, with a judge on the Fifth Circuit Court of Appeals in 2023 blocking the rule from taking effect. But the Biden administration appeal to the U.S. Supreme Court, which has agreed to take up the case, titled Department of Education v. Career Colleges and Schools of Texas. Proceedings were paused earlier this year as the Trump administration requested more time to review the case after his return to office, but the court ordered briefings to resume on Monday, just weeks after Solicitor General D. John Sauer filed a motion making the request. Sauer wrote that Trump's Justice Department "decided to adhere to its position that the Higher Education Act permits the assessment of borrower defenses before default, in administrative proceedings, and on a group basis." On Monday, the Supreme Court granted the motion, meaning the case will resume and the court will hear oral arguments and weigh in on whether the Biden-era rule can remain. The court will consider whether or not the lower court erred in ruling that the Higher Education Act of 1965 doesn't allow for borrowers to file for borrower defense before default. Alan Collinge, founder of the organization Student Loan Justice, told Newsweek that for-profit colleges' opposition to the rules "says it all." "The majority of their students wind up in default, years of history have shown," Collinge said. "The Departments of Justice and Education should go much further than simply defending the Borrower Defense Rule in court. They should be shuttering the large majority of these scam colleges. They should have closed them down years ago, frankly. "Standard bankruptcy protections must be returned to the loans, as the right exists for all other borrowers, all other loans. Only then will the government be properly incented to crack the whip on these horrible schools." Still, Collinge said the case is "just re-arranging deckchairs on a sinking ship" and does little to address the larger issue of student loan debt for most borrowers. Most borrowers from for-profit colleges default on their loans regardless, he said. Newsweek reached out to the Department of Education and a lawyer representing Career Colleges & Schools of Texas for comment via email. What People Are Saying Former Solicitor General Elizabeth Prelogar of the Biden administration, in a petition to the court: "Taken to its logical conclusion, the court of appeals' decision would require wasteful litigation to resolve every asserted borrower defense—even when the Department and the borrower agree that the loan should be discharged—imposing significant burdens on borrowers, the Department, and the federal Judiciary. That threat and the growing backlog of unresolved borrower defense applications under the 2022 Rule impose current harms on the Department and on borrowers entitled to efficient resolution of their assertions of entitlement to relief. The Court should not permit the Fifth Circuit to continue its practice of contravening foundational equitable principles by ordering universal relief. This Court's review is warranted now." Attorneys representing Career Colleges and Schools of Texas wrote to the court: "Petitioner Department of Education raises two distinct statutory issues, neither of which involves a conflict of authority, and both of which the court of appeals decided correctly. Furthermore, this case is a poor vehicle for addressing the question of preliminary relief, as the Department seeks review of only one of several grounds of invalidation and the moribund rule is unlikely to be maintained, let alone defended by the incoming administration." What Happens Next Oral arguments have not yet been scheduled for the case but could be held as soon as the next term.
Forbes
23-06-2025
- Politics
- Forbes
Student Loan Forgiveness Case Resumes At Supreme Court—What To Know
The Supreme Court said Monday that a case over a Biden-era student loan forgiveness rule will resume—after the Trump administration briefly put the litigation on hold—which could affect thousands of borrowers who want to have their loans discharged after their schools closed or defrauded them. The Guardian or Authority of Law, created by sculptor James Earle Fraser, rests on the side of the ... More Supreme Court on Sept. 28, 2020 in Washington. (Photo by) Getty Images The Supreme Court agreed Monday to resume Department of Education v. Career Colleges and Schools of Texas, a dispute over a 2022 rule that streamlines the process for borrowers to have their federal loans discharged if their schools closed or engaged in misconduct. While borrowers have always been able to try to get out of defaulting on their loans by alleging misconduct by their school, the 2022 rule—created after a huge influx of complaints led to a significant backlog—defined clear grounds for borrowers to be able to have their loans discharged before they default on them, making the process of challenging them much easier. Under the rule, known as 'Borrower Defense Loan Discharge,' borrowers can challenge their loans if their school commits misconduct through misrepresentation, substantial omission of fact, breach of contract or aggressive or deceptive recruitment, if if there's a court ruling that the school violated the law, or the Department of Education takes away the school's ability to participate in federal student loan programs based on any misconduct. The rule also allows loans to be discharged if a borrower's school closed while they were enrolled or if they withdrew from the school less than 180 days before it closed, and makes it easier for groups to collectively seek relief from student loans, such as on behalf of borrowers who attended a specific school during the same years. A federal appeals court struck down the 2022 rule and made it even harder for borrowers to get out of paying their loans due to misconduct, saying they could only present those defenses in court after already defaulting on their loans. The Biden administration asked the Supreme Court to overturn the appeals court's ruling and the court agreed in January to take up the case for oral arguments, but the Trump administration then put the case on pause for a few months while it considered whether it agreed with the Biden administration's argument—ultimately saying in May it does agree and the court should resume the case. The Supreme Court still hasn't scheduled the case for oral arguments yet, though it's expected to be heard at some point during the court's next term, which runs from October through June 2026. A decision in the case would be announced by the end of June 2026. Can Borrowers Challenge Their Loans Now While The Case Is Pending? The Education Department is not adjudicating any requests while the litigation is pending for borrowers to have their loans discharged for either misconduct or a school closing. Borrowers can still submit an application for relief under the rule in the meantime, but must continue paying their loans until the program resumes—if it does—and they're notified the application was successful and their loans are discharged. If their loans are discharged, then borrowers may be able to have the loan payments they previously made refunded, per the Department of Education's guidance, in addition to no longer having to make loan payments going forward. Borrowers should consult their loan servicer to determine their specific eligibility for a refund. If the Supreme Court rules against the government and upholds the appeals court ruling, that would mean borrowers whose schools committed misconduct or closed would likely only be able to use that as a defense if they default on their loans, rather than being able to use it preemptively as a way to have their loans forgiven. The Biden administration warned that would lead to a huge backlog of complaints and strain the government's resources, should thousands of borrowers now have to present their cases in court, and would harm borrowers by forcing them to default on their loans in order to possibly get relief. 'Taxpayer resources would be spent resolving hundreds of thousands of collection suits in which there is no real controversy because both the lender and the borrower agree that the borrower has a valid defense to repayment,' the Biden administration argued, also claiming 'vulnerable borrowers who are subject to fraudulent schemes would be saddled with debt that they cannot discharge without first risking wage garnishment, credit-report damage, and offsets against federal benefits.' The Trump administration told the Supreme Court it will aim to create a replacement rule that would be similar in trying to streamline the process for seeking loan forgiveness, should the high court strike the 2022 rule down. Key Background The 2022 rule making it easier for borrowers to challenge their loans was part of a broader slew of measures on student loan forgiveness that came out during the Biden administration. The Biden administration broadly sought to relieve student debt, but faced challenges in its efforts to provide more universal loan relief, with the Supreme Court ultimately striking down the government's program to provide sweeping forgiveness to tens of millions of federal borrowers. The administration instead implemented a series of more targeted measures aimed at specific groups of borrowers, saying in January it had approved $188.8 billion in student loan forgiveness. The Trump administration's decision to continue the lawsuit over the Borrower Defense Loan Discharge program comes as top officials have otherwise been largely opposed to student loan forgiveness, with Education Secretary Linda McMahon saying in April that 'American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies.' The White House has made several changes to the federal student loan program, most notably by trying to move it to the Small Business Administration and by resuming collections on defaulted loans. President Donald Trump's signature policy bill would also broadly overhaul student loans and student loan repayment plans, including by abolishing current income-driven repayment plans and imposing caps on new student loans. That legislation passed the House but is still pending in Congress, with the Senate expected to begin voting on it this week. Forbes How Trump's Spending Bill Could Impact Student Loans—Including Higher Payments And More Restrictions By Alison Durkee Forbes Trump Resumes Defaulted Student Loan Collections Today—Impacting Millions Of Borrowers. Here's What To Know. By Alison Durkee Forbes Trump's Presidency And Student Loans: What Move To Small Business Administration Means For Borrowers By Alison Durkee
