US court blocks Biden debt relief rule benefiting defrauded students

By Nate Raymond

(Reuters) – A federal appeals court on Monday blocked the Biden administration from proceeding with another piece of its student debt relief agenda, an effort to make it easier for people who are defrauded by their schools to have their loans forgiven.

At the request of a group representing for-profit colleges, the New Orleans-based 5th U.S. Circuit Court of Appeals prevented the rule from taking effect pending the outcome of an appeal to be heard in November.

The three-judge panel gave no reason for why it was granting the emergency injunction sought by the trade group, Career Colleges and Schools of Texas (CCST), which is appealing a lower-court judge’s decision to not block the rule.

The rule is separate from Biden’s more sweeping student debt relief plan. The Supreme Court in June blocked his administration from canceling $430 billion in student loan debt for 43 million borrowers. The Democratic president has since announced plans to provide relief for student loan borrowers using a different approach.

The 5th Circuit had previously administratively stayed the regulation so it could weigh the request. The panel’s three judges — Edith Jones, Kyle Duncan and Cory Wilson — were all appointed by Republican presidents.

Neither CCST or the U.S. Department of Education responded to requests for comment.

CCST sued in February after the Education Department in October finalized a rule changing a “borrower defense to repayment” program that allows students to seek debt relief if their schools mislead them.

Students who have received debt forgiveness through the borrower defense program have attended for-profit colleges including Corinthian Colleges and ITT Technical Institute.

The Biden administration’s rule amended the grounds for borrower relief, established new procedures through which the department would review their claims and allowed for a means for the agency to provide relief to entire groups from one school.

CCST called the rule an unlawful and unconstitutional plan designed “to accomplish massive loan forgiveness for borrowers and to reallocate the correspondingly massive financial liability to institutions of higher education.”

(Reporting by Nate Raymond in Boston; Editing by Alistair Bell)

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