$6B worth of student debt could be canceled after Supreme Court refuses request from for-profit schools

The Supreme Court declined to intervene in a settlement lawsuit on Thursday that may result in up to $6 billion in student debt being dismissed for students that attended certain colleges, which includes multiple for-profit schools. This request to stop the settlement from taking effect was rejected in a brief order by the high court. Former students of these colleges brought the case forward, claiming that the schools falsely advertised academics and job prospects.

California-based US District Judge William Alsup had approved the settlement in November 2020. The Supreme Court appeal was filed by three universities that had been added to the list of schools that the federal government had previously linked with claims of “substantial misconduct.”

In total, there are over 150 institutions on the list; the trio of educational institutions found within the settlement are for-profit Lincoln Educational Services Corp., American National University, as well as nonprofit Everglades College.

Last summer, the Department of Education announced that they would be settling the Sweet v. Cardona lawsuit, which sought a court order requiring the department to adjudicate claims made under the Borrower Defense Loan Discharge program. This program allows the department to provide loan relief to students who were deceived by their universities.

The government has already taken steps to implement the settlement, which will impact a minimum of 3,800 borrowers. Of these, roughly 400 have already received assistance. The lawsuit is separate from the Biden administration’s aim to provide debt relief of up to $20,000 to millions of borrowers, which could potentially cost taxpayers $400 billion. The Supreme Court is expected to hear this case by the end of June, and a lower court has put the plan on hold due to concerns over its legality.