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Appeals Court Blocks Relief for Students Who Were Defrauded by Their Schools

Student borrowers who were defrauded by their colleges will have to continue waiting for debt relief after the U.S. Court of Appeals for the Fifth Circuit blocked rules aimed at making it easier for them to get loan forgiveness.

The Department of Education is now barred from implementing the policies, which took effect last month, while the three-person panel of conservative appointees hears a lawsuit from Career Colleges and Schools of Texas (CCST), an association of nearly 100 for-profit institutions. CCST had sued to forestall regulations that would have relaxed deadlines for students to file claims, expanded the applicable types of misconduct by colleges to include aggressive and deceptive recruitment practices, and ensured that borrowers received timely decisions.

In its complaint, the CCST accused the Department of Education of seeking to offer “massive loan forgiveness for borrowers” and to place the financial liability on institutions of higher ed.Dr. Jason AltmireDr. Jason Altmire

“The final rule will cause financial and reputational harm to schools, educational harm to students, and budgetary harm to the public,” it said.

CCST did not offer comment on the injunction, but Career Education Colleges and Universities (CECU), the national organization representing for-profit schools, cheered the decision.

“Knowing that this rule has a strong chance to be struck down during the upcoming legal process, it is unjustifiable to allow its implementation while the court proceedings continue,” said Dr. Jason Altmire, CECU’s president and CEO. “We are pleased that today’s ruling upholds this view.”

The ruling was pilloried by organizations that support student borrowers, including Americans for Fair Debt Relief, which was founded this year in response to the Supreme Court’s decision to block President Joe Biden’s plan to provide up to $20,000 of student debt relief for qualifying students.

“We are disappointed by this partisan decision,” said Josh Kilroy, the group’s founder.” "For the students who have been trapped for years by the student loan debt they took on to attend these fraudulent institutions, the rules passed by the Biden Administration have been a lifeline, a path to financial freedom and stability after being misled into a life of debt peonage."

The Department of Education vowed to continue fighting.

"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," a Department spokesperson said to USA Today. "And 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 Fifth Circuit Court will hear the case on November 6th.

Jon Edelman can be reached at [email protected]

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