A federal appellate court blocked the Biden administration's borrower defense regulations last week, drawing praise from the for-profit industry and criticism from student advocates.
In issuing the injunction, the three-judge panel, all of whom were appointed by Republican presidents, found a “strong likelihood” that a lawsuit brought by Career Colleges and Schools of Texas would succeed against the U.S. Department of Education based on the merits of the case.
Issued by the department in 2022, the regulations were designed to provide loan relief to students who were defrauded by colleges or couldn’t complete their programs because their institutions closed.
The Texas group, an industry organization for for-profits in the state, challenged the rules, arguing that they put colleges on the hook for mass loan forgiveness, and that Congress didn’t give the Education Department the authority to recoup loan forgiveness costs from colleges.
The regulations “will significantly facilitate certain student loan discharges while creating uncertainty, complexity and potentially huge liability for the association’s members,” Judge Edith Jones wrote in the opinion. “The Rule overturns recent regulations issued by the previous Administration and upends thirty years of regulatory practice.”
In a footnote, Jones also accused the administration of trying to “sidestep, to the greatest extent possible,” the U.S. Supreme Court ruling last year against the Biden administration’s plan for mass student loan forgiveness, which Jones characterized as making “Presidential student loan discharges illegal.”
An Education Department spokesperson said via email Monday that the Higher Education Act “clearly grants borrowers a path to be free from their loans in these circumstances,” and that the agency “will review the ruling.”
Student borrower advocates — who have supported the rules as widening eligibility for loan discharges and holding colleges accountable for bad behavior — fired back at the court over the regulations.
“The Fifth Circuit got it exactly backwards. Borrower Defense is a critical protection for student borrowers and has been in place for over thirty years,” Eileen Connor, president and executive director of the Project on Predatory Student Lending, said in a statement. “It’s the brazenness of for-profit schools, the scope of their greed, and the willingness of courts to accept their specious complaints that is new and unprecedented.”
Connor, whose group filed an amicus brief in the case, also called the ruling “another troubling sign of a political climate in which people are using the courts to take away people’s legal rights.”
The for-profit college sector has vocally opposed the regulations.
Its leading trade group, Career Education Colleges and Universities, applauded the 5th Circuit’s decision to block the rules.
“All schools should be pleased with this ruling, as the rule of law was upheld and the Biden administration’s extreme agency overreach was denied,” CECU President and CEO Jason Altmire said in a statement. “Hopefully, the Department of Education will take this opportunity to withdraw these excessive regulations.”
The 5th Circuit previously issued a temporary injunction against the rules ahead of hearing the case. The latest injunction, which overturned a lower court’s decision not to block the rule, will be in effect as the case returns to district court for judgment.
