The US Supreme Court refused to block a legal settlement that would cancel $6 billion in debt for students.
The class-action settlement concerns loans that borrowers claim should be canceled because they were taken out based on misrepresentation made by their schools, many of which are for-profit. The settlement could be worth more than $6 billion, according to NBC.
The case stems from a settlement that California-based U.S. District Judge William Alsup approved in November in a case brought by borrowers. The deal is aimed at wiping out a backlog of hundreds of thousands of those applications. Some have languished at the department for years.
The Biden administration and attorneys who represent the student loan borrowers had argued that the three colleges lacked standing to challenge the settlement in the first place, dismissing the schools’ claims of reputational harm as too speculative.
In its brief earlier this week, the Justice Department pushed back on the idea that the class-action settlement is related to Biden’s broader debt cancellation program, calling them “entirely distinct.” The settlement “does not reflect any ‘en masse’ cancellation of outstanding debt, nor an assertion by the Secretary of the power to discharge the Department’s entire $1.6 trillion loan portfolio,” Solicitor General Elizabeth Prelogar wrote.
The decision by the Supreme Court on Thursday sends the case back to the 9th Circuit Court of Appeals, which has already set a briefing schedule to hear the colleges’ appeal of the settlement.
It’s possible the case could return to the high court after that. The justices’ ruling on Thursday addressed only emergency relief. But in the meantime it clears the Education Department to continue processing loan discharges for tens of thousands of borrowers.
The Biden administration reported on Wednesday that it had already wiped out the debts of about 78,000 borrowers out of the roughly 200,000 borrowers who qualify for immediate relief under the settlement.
Beyond the immediate loan forgiveness, the settlement also requires the Education Department to set up a streamlined process for tens of thousands of additional borrowers to obtain loan forgiveness.
Eileen Connor, president and director of the Project on Predatory Student Lending, which represents the class of student loan borrowers in the case welcomed the court’s decision on Thursday.
“Today’s swift and decisive action from the highest court should end, once and for all, any ongoing debate about the legitimacy of this settlement,” she said in a statement. “The message is clear: the rights of student borrowers will not falter, even in the face of well-funded, politically-motivated attacks masquerading as legal argument.”