​Supreme Court to review student loan policy that forgave $17 billion in debt: Should you be concerned? 

13/01/2025
–
05:45
CSTIn a significant decision, the U.S. Supreme Court announced it will review a lower court ruling that blocked a key Joe Biden administration policy aimed at forgiving the student debt of borrowers who were defrauded by their colleges. This move comes just days before President Joe Biden is set to leave office, potentially shaping the legacy of his administration’s efforts to tackle the nation’s growing student debt crisis.Throughout his presidency, Biden made student debt relief a cornerstone of his domestic agenda, but the Supreme Court has repeatedly thwarted his plans. In 2023, the Court halted his administration’s landmark proposal to forgive $400 billion in student debt, dashing the hopes of millions. Later that year, another initiative aimed at lowering monthly payments and expediting loan forgiveness was similarly blocked.The current case focuses on the “borrower defense” rule, which allows students to request federal loan forgiveness if they can prove their college engaged in misconduct, such as misrepresenting job prospects. While the Biden administration canceled $17.2 billion in student loans for nearly 975,000 defrauded borrowers as of April 2024, the process has faced opposition from for-profit colleges and trade schools.The Biden administration sought to streamline the borrower defense process, arguing that students who were defrauded deserve timely relief. However, the Career Colleges and Schools of Texas (CCST)-representing over 70 for-profit institutions-filed a lawsuit claiming the rule unfairly favored borrowers. A panel of judges appointed by Republican presidents on the 5th Circuit Court of Appeals sided with the CCST, blocking the rule.In their injunction request, the CCST argued that the administration’s rule placed “a thumb on the scale to maximize the number of approved claims”, furthering a broader loan forgiveness agenda. They expressed concerns that the relaxed requirements made it too easy for borrowers to claim fraud, potentially harming the for-profit education sector.Despite these setbacks, Biden’s administration achieved notable victories in addressing student debt. The Department of Education wiped away $166 billion in student loans for 4.4 million borrowers, offering relief to those with longstanding debts and those defrauded by their institutions.However, Biden’s larger ambitions to cancel debts for tens of millions were quietly shelved in late 2024.The Supreme Court’s decision to review the borrower defense rule comes at a time when student debt continues to balloon. Americans now owe a staggering $1.6 trillion in student loans, a 42 percent increase over the past decade, with the average borrower holding $40,681 in debt.