Key Takeaways
. The US Supreme Court has allowed as many as 200,000 former students to demand debt cancelation
. The court upheld an earlier settlement agreed to last November by the Education Department
. Three educational institutions had asked the apex court to block the settlement
YEREVAN (CoinChapter.com) — The US Supreme Court has allowed the cancelation of $6 billion in student loans after refusing to overturn an earlier favorable ruling of federal judge. In November 2022, judge Willaim Alsup in California ruled in favor of a legal settlement between former students and the US Government’s Education Department to grant them debt relief.
The students had secured an advantageous verdict after alleging that these schools and colleges had misled them about the educational program and job prospects. They claimed colleges had used dishonest methods to convince them to ensure those student loans. Hence, because they did not get what the colleges and schools had promised, they should not be held liable to repay the debts.
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US Supreme Court rejects petition of educational institutions
Three US educational institutions had petitioned the Supreme Court to halt the earlier settlement order. However, refusing to overturn the earlier ruling, the country’s highest Federal Judiciary turned down their request, granting much-needed relief to the former students.
Two of these institutions against the $6 billion student debt forgiveness plan (Lincoln Educational Services Corp and American National University Inc) are for-profit. The third one, Everglades College Inc, is a nonprofit institute. These three alone will see the debts of as many as 3,500 students canceled thanks to the dispute.
The Educational Department, which was also party to the case, argued that the colleges have no legal standing to challenge the settlement. It had earlier placed them on its list of over 150 institutions linked with claims of “substantial misconduct.”
However, the court granted the three institutions 7 days to allow them to seek a stay from the Ninth Circuit Court of Appeals. In the meantime, the court has stayed discharges of applicants who attended a school operated by one of the three intervening entities.
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Students rush to claim victory
Following the outcome of the petition in the Supreme Court, the student groups rushed to celebrate yet another victory.
Eileen Connor, who is the Director of the Project on Predatory Student Lending at the Legal Services Center of Harvard Law School, welcomed the decision. Her organization represents students who were lured and trapped into student debt by the institutions.
“Today’s swift and decisive action from the highest court should end, once and for all, any ongoing debate about the legitimacy of this settlement. The message is clear: the rights of student borrowers will not falter, even in the face of well-funded, politically-motivated attacks masquerading as legal argument,”
Connor said.
As it stands, the Educational Department will cancel the debts of as many as 200,000 borrowers from its list of 150 schools.
Meanwhile, the Supreme Court is yet to take another decision on the legality of President Joe Biden’s plan to cancel $430 billion in student debt for about 40 million borrowers.
The issue had become a cause of much political debate in the country, with Republicans accusing the Biden Administration of executive overreach.
After several US States and advocacy groups challenges Joe Biden’s move, a Federal appellate court issued a stay order last October. In response, the Biden Administration moved to the Supreme Court with a plea to overrule the ban. Experts believe the verdict can come as early as June 2023.
