President Biden has had a tough time in the courtroom. His bad luck isn’t ending anytime soon.
Because a federal court has told President Biden to stand down with this stunning order.
On Monday, a federal judge temporarily blocked new rules from the Biden administration that would erase the debt of student borrowers who were supposedly scammed by for-profit institutions that unexpectedly collapsed.
The U.S. Court of Appeals for the 5th Circuit issued its order in response to a petition filed by Career Colleges and Schools of Texas, an organization that advocates for private career-oriented or trade schools in Texas.
While federal law has always allowed for the cancellation of student loans for borrowers who have been misled or cheated, new borrower defense regulations implemented by the Biden administration last month aim to make it easier for borrowers to seek do so.
The new policy would provide automatic compensation for debtors whose universities closed, and it would allow borrowers to lodge claims if they felt they were deceived by their college.
The new regulations expand the range of infractions that would qualify a borrower for debt cancellation and reduce the time constraints under which an application must be submitted.
The rule prohibits the use of arbitration clauses, which are common in student contracts at for-profit universities.
More than 70 for-profit Texas institutions, represented in the lawsuit by CCST, claim the new regulation was designed “with a thumb on the scale to maximize the number of approved claims and, ultimately, further the administration’s loan forgiveness agenda.”
The case is scheduled to be heard in court on November 6. As a result of the order, claims filed or received after July 1 will not be held to the new criteria at this time.
On Monday, the Department of Education announced that it was evaluating the directive.
“The Department issued a set of new and stronger regulations to ensure that borrowers have a path to relief when their colleges take advantage of them or leave them stranded by closures,” the agency said in a statement.
“The Department won’t back down in our efforts to take on predatory colleges, provide relief to borrowers who have been cheated or had their school close, and hold institutions accountable for deceptive schemes.”
The Washington Post says that since 2021, the Biden administration has granted $13.5 billion in student debt discharges for about 1 million borrowers who were misled by their universities.
As of January 2023, about 500,000 borrowers had filed borrower defense claims with the Department of Education.
In the lawsuit Sweet v. Cardona, Biden agreed to forgive $6 billion in debt for roughly 300,000 borrowers. This settlement is unaffected by the current injunction against the Biden administration’s guidelines.
The national counterpart to CCST, Career Education Colleges, and Universities, was ecstatic with the injunction.
CECU CEO Jason Altmire is convinced that, if the matter is brought forward, the facts will reveal that the new regulation is an administrative overreach in violation of the Department’s authority, the Administrative Procedure Act, and the Constitution.
“Knowing that this rule has a strong chance of being struck down during the upcoming legal process, it is unjustifiable to allow its implementation while the court proceedings continue.”
Stay tuned to the Federalist Wire.
