US court blocks Biden debt relief rule benefiting defrauded students (updated)

ITT Educational Services

08/08/2023 02:33

(Adds comment from Education Department)
    By Nate Raymond
       Aug 7 (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)
 ((Nate.Raymond@thomsonreuters.com and Twitter @nateraymond;
347-243-6917; Reuters Messaging:
nate.raymond.thomsonreuters.com@reuters.net))