Supreme Court won’t block $6B student debt relief settlement

The Supreme Court on Thursday allowed a roughly $6 billion legal settlement to go forward that will cancel student loans for hundreds of thousands of borrowers who say they were misled by their schools.

The justices did not comment in rejecting an emergency plea from Everglades College, Lincoln Educational Services Corp. and American National University. The schools had argued that they were unfairly included on a list of more than 150 institutions, most of them for-profit, linked with alleged misconduct. Lincoln and American are for-profit institutions; Everglades is a not-for-profit.

The justices’ action comes as the high court is weighing what to do with the Biden administration’s plan to wipe away $400 billion in student debt held by more than 40 million people. A decision on that plan is expected by late June.

The legal challenges have some similarities but the administration is relying on different laws in the two programs.

The class-action settlement was approved late last year by U.S. District Judge William Alsup in San Francisco in response to complaints that the 150-plus schools had made false recruiting claims and left many students unable to find jobs.

The Justice Department has already begun implementing the agreement and said in court that roughly 3,800 borrowers who are part of the settlement attended the three schools.

Lower courts had previously denied the schools’ efforts to halt the settlement while they appeal.