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The U.S. Supreme Court could hear yet another case challenging student loan forgiveness, this time to reverse cancelation for hundreds of thousands of borrowers who were defrauded by the institutions of higher learning they attended.
Around 200,000 borrowers were granted over $6 billion in forgiveness by a federal judge thanks to Sweet v. Cardona, a class action lawsuit filed in 2019 by borrowers who attended one of the 153 mostly for-profit colleges named in the suit. In addition to the automatic loan cancellation, they were to receive refunds for payments theyd made and adjustments to their credit scores within one year.
Borrowers who are part of the class action would receive forgiveness as part of the borrower defense to repayment, a loan cancelation process set up by President Barack Obama to help those who had become fraud victims of scammy for-profit schools.
The Department of Education was set to start implementing the settlement earlier this year. But three of the schoolsAmerican National University, Everglades College Inc., and Lincoln Educational Servicesare asking for it to be halted.
That request was rejected by a federal judge, which the schools appealed. And now, those schools are asking the Supreme Court to intervene. Its too soon to say what the court will doit might not even take up the casebut it could be another blow to federal student loan forgiveness, and broader efforts by President Joe Bidens administration to help defrauded borrowers. Twenty states, including Florida, Ohio, and Texas, filed an amicus brief with the Supreme Court in support of the schools.
It would also be a blow to the hundreds of thousands of borrowers, including Kyle Sudhoff, who would receive forgiveness for their loans. Sudhoff attended DeVry University, in part because it promised to help with job placement and advertised the high starting salaries graduates went on to attain.
None of that panned out for Sudhoff, who graduated in 2011 with a degree in technical management. Not only did the school not help with job placement, he told Fortune, but he couldnt find a job after he graduated, period. He struggled to make payments on his $35,000 in student loans for years.
He came across borrower defense to repayment in 2017, and in September 2022 his loans were discharged and he was refunded for payments he had made since he graduated.
Im very lucky, Sudhoff said. The money Im getting back is going to be helpful. Its a big relief.
But that luck could run out for members of the Sweet v. Cardona class, depending on what the Supreme Court does. As of now, the Department of Education is starting to implement the settlement; borrowers should be receiving email notifications that their applications are being approved. That said, those who attended the three schools challenging the settlement will have their loan discharge delayed until a decision is made by the courts on their motion.
Future of widespread loan forgiveness still unknown
That program is separate from Bidens widespread student loan forgiveness plan, which would eliminate $10,000 to $20,000 in debt for most federal borrowers. It has also faced legal challenges, some of which were recently heard by the Supreme Court. Though borrowers are anxious to know if and when their loans will be forgiven, the status of that program rests on how the court rules in the next few months.
After the challenges to the Bidens widespread forgiveness program, Michael Brickman, adjunct fellow at the conservative American Enterprise Institute, told Fortune that conservatives and other opponents would likely challenge other student loan programs.
That could include long-standing federal programs like Public Service Loan Forgiveness, as well as recent changes the Biden administration made to income-driven repayment plans that make them more affordable for borrowers.
