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US Supreme Court Allows $6 Billion Student-Debt Relief to Move Forward for Nearly 290,000 Borrowers

Supreme Court
Supreme Court ( Photo: NBC News )

The borrowers had sued the Department of Education in San Francisco’s federal court in 2019, alleging the agency was improperly ignoring the borrowers’ applications for relief.

Supreme Court

Supreme Court ( Photo: Investopedia )

The US Supreme Court allowed the Department of Education to grant at least $6 billion in student-debt relief to roughly 290,000 borrowers

The settlement follows the Department of Education‘s regulations, which allow borrowers to have their federal debt discharged if their schools have scammed them. The schools who had moved in court to block the deal had asked the Ninth Circuit Court of Appeals to slow the settlement down while considering the case.

However, the Circuit refused to do so. The schools then requested the Supreme Court to stop the settlement, but the court declined to intervene, allowing the Department to continue processing discharges for the 290,000 borrowers under the settlement.

The decision of the Supreme Court to decline the petition of the schools is considered decisive and swift. It also resists the schools’ attempt to tie this settlement to the broader debate over student-debt cancellation.

The Supreme Court’s decision means that the Department can proceed with discharging the student debt of the affected borrowers

However, the Supreme Court‘s decision also has some relevance to the broader debate over mass student-debt relief. The schools had argued that the Department of Education’s authority to cancel the debt of the affected borrowers could be used to cancel, en masse, every student loan in the country.

The broader debt relief cases are currently before the court, and the Biden administration has rooted its authority to cancel up to $20,000 in student loan debt for a wide swath of borrowers in the HEROES Act. However, if the Supreme Court knocks down student-debt relief tied to the HEROES Act, some cancellation advocates are urging the Biden administration to try again using a different law, the Higher Education Act.

The decision of the Supreme Court to decline the petition of the schools to stop the settlement from moving forward while the Ninth Circuit Court of Appeals considers the case has kept open the channel that the Department of Education might use its authority under the Higher Education Act to cancel student debt.

Luke Herrine, an assistant law professor at the University of Alabama, said that the Supreme Court’s decision in the San Francisco case keeps open a channel that might have been closed off. This would have happened if the justices had allowed the question of the stay to be litigated, which could have created a more narrow reading of the agency’s settlement and compromise authority.

Advocates and activists have been pushing the Department of Education for years to broadly cancel student debt using its authority under the Higher Education Act to “compromise, waive, or release any right” to collect on student loans. If the Supreme Court says the HEROES Act does not justify the current debt relief plan, some are urging the administration to use that authority.

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