Supreme Court allows $6 billion student loan debt settlement
Kent Nishimura / Los Angeles Times via Getty Images file
NBC News
WASHINGTON — A settlement that will allow thousands of student loan debts to be canceled will go into effect after the Supreme Court on Thursday declined to block it.
The Supreme Court in a brief order rejected a request made by colleges challenging the settlement.
The case is unrelated to President Joe Biden’s broader effort to forgive student loan debt, which is also before the justices, with a ruling due in the next two months.
The class-action settlement concerns loans that borrowers claim should be canceled because they were taken out based on misrepresentations made by their schools, many of which are for-profit. The settlement could be worth more than $6 billion.
The case arises from a settlement that California-based U.S. District Judge William Alsup approved in November in a case brought by borrowers. The government has already started implementing the settlement.
The application at the Supreme Court was filed by Everglades College, Lincoln Educational Services Corp. and American National University. Lincoln and American National are for-profit enterprises, while Everglades is not-for-profit. All three operate colleges the federal government placed on a list of more than 150 institutions that it said are linked with claims of “substantial misconduct.”
The colleges object to that characterization. The Justice Department says about 3,800 of the affected loans involve the three colleges and approximately 400 of them have already been discharged.
The federal Higher Education Act allows debt cancellations in specific circumstances, but the challengers say Education Secretary Miguel Cardona has exceeded his authority.
“The secretary’s claimed authority amounts to nothing less than the power to cancel, en masse, every student loan in the country,” the challengers said in court papers.
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