Supreme Court greenlights student loan forgiveness for defrauded borrowers. What’s next?
April 21, 2023
The Supreme Court has declined to a block a $6 billion settlement between the U.S. Education Department and nearly 300,000 student loan borrowers who were defrauded or mislead by their colleges.
The decision last week stems from a 2019 class-action lawsuit that is unrelated to the cases challenging President Joe Biden’s plan for mass debt relief. During oral arguments for those cases earlier this year, the court’s conservative justices signaled significant skepticism of the plan, which would forgive up to $20,000 in loans for low- and middle-income Americans.
The Supreme Court’s recent decision, however, shows its openness to debt forgiveness for at least some students – and hints at another vehicle for doing so if Biden’s plan is shot down.
Debt relief coming for thousands of defrauded students
Student loan borrowers who are defrauded by their schools are eligible for relief through what’s known as “borrower defense to repayment.” The process is designed largely to support former students of for-profit colleges who default on their loans and struggle to find employment at much higher rates than their counterparts who attended other types of higher-education institutions.