The U.S. Supreme Court has ruled in favor of student borrowers who are seeking debt relief after a lawsuit was filed on their behalf.
Student Debt Relief
The Sweet vs Cardona case was originally brought in 2019 on behalf of 200,000 borrowers whose “borrower defense claims” had been stalled. These claims allow students who believe they have been defrauded by their schools to have their debts wiped out, according to a published report in Yahoo News.
The US Education Department agreed to a settlement last year, which was approved by a federal judge. However, three schools named in the settlement appealed the decision and requested that the relief be paused while the legal process played out. This request was rejected by the Ninth Circuit Court of Appeals, and now the Supreme Court has come to the same conclusion.
The schools argued that they were not given “due process” to respond to the claims in the settlement and that they suffered reputational harm from the settlement. However, the Education Department pushed back on those claims, stating that it had already begun implementing the settlement.
Supreme Court Released Its Decision
In a published article in The Washington Post, the Supreme Court’s decision means that $6bn in student debt relief will now be granted to borrowers, who were previously trapped in debt due to stalled borrower defense claims. This ruling is separate from President Joe Biden’s plan to cancel up to $20,000 in student debt for federal borrowers.
That plan was paused in November due to two conservative-backed lawsuits seeking to permanently block the relief, and the Supreme Court heard oral arguments for the cases in February. It’s expected to issue a final decision on the legality of the broad debt relief plan by June.
The Education Department wrote in its response filed with the Supreme Court that “the Department has already begun implementing the settlement by notifying class members that they will receive discharges, directing loan servicers to start processing those discharges, updating its own internal systems to reflect the rescission of previous denials, and beginning the adjudication process for those reopened cases through the settlement’s streamlined procedures,” NBC News reports.
Furthermore, the Department argued that a stay in the settlement would cause confusion among affected borrowers, loan servicers, and the public, and would undermine its ability to effectively implement the borrower-defense program.