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, a rule that would 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 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 not to block the U.S. Department of Education’s rule.

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

The new rule offers greater grounds for borrowers to get debt relief in cases of fraud and establishes a procedure for the Education Department to forgive debt for groups of students at schools where this occurred.

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.

A spokesperson for the Education Department in a statement said it was reviewing Monday’s order, adding that it “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.”

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

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.”

The panel’s three judges — Edith Jones, Kyle Duncan and Cory Wilson — were all appointed by Republican presidents.

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