FOLLOW US

The U.S. Supreme Court has agreed to review a Fifth Circuit ruling that blocked the Biden administration's expansion of benefits under a federal program aimed at forgiving student loans for borrowers defrauded by higher education institutions. On Friday, the justices granted the U.S. Department of Education's petition for writ of certiorari, but limited the review to one question: whether the Fifth Circuit was correct in finding that the Education Act does not allow borrower defenses to repayment to be assessed before default, in administrative proceedings, or on a group basis.

The Education Department filed the petition in October, seeking to reverse the Fifth Circuit panel's decision that halted changes to a program allowing student borrowers to have their loans forgiven if they were defrauded by their educational institutions. The contested rule is part of the borrower defense section of the U.S. Code, which is separate from President Biden's broader student loan forgiveness initiative that the Supreme Court blocked in 2023.

The program allows borrowers to challenge loan repayment based on actions or omissions by the school, such as tax refund offsets or wage garnishment. The changes to the rule at issue involve expanding the look-back period for loan discharges based on school closures and making it easier for borrowers to receive automatic discharges.

In April, the Fifth Circuit ruled in favor of a preliminary injunction, siding with the Career Colleges and Schools of Texas, which argued that members of the organization would suffer irreparable harm from the new rules. The court believed the plaintiffs demonstrated a likelihood of harm without a delay in the rule's effective date.

The Education Department argues that the Fifth Circuit's decision effectively invalidates the long-standing method of assessing borrower defenses. The department also sought to have the Supreme Court review whether the district court should have issued preliminary relief universally, though the Court did not consider this issue.

The changes in the 2022 rule also include provisions on school closures, including a shorter period for automatic loan discharges based on these closures. The Career Colleges and Schools of Texas maintains that the rule unlawfully empowers the Education Department to cancel student loans rather than allowing borrowers to defend against repayment.

A coalition of 23 states filed an amicus brief supporting the Biden administration, asserting that the changes are critical to addressing predatory lending practices in higher education.