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Colleges appeal $6 billion student loan settlement

Several schools say the deal did not assess the validity of the borrowers’ claims and would damage their reputations

A group of colleges is trying to overturn a $6 billion settlement between the Biden administration and student loan borrowers who say they were defrauded by their schools, claiming that the deal violates the law.

Everglades College, American National University and Lincoln Educational Services, the parent company of Lincoln Technical Institutes, filed an appeal to the U.S. Court of Appeals for the 9th Circuit and a motion to halt the settlement pending appeal Friday.

The schools are among 153 institutions — many of which are for-profit colleges — that the Education Department said had engaged in “substantial misconduct … whether credibly alleged or in some instances proven.” Former students of those schools who applied for debt relief are entitled to full loan forgiveness under the settlement.

Judge grants final approval of $6 billion student loan settlement

The agreement resolves a class-action lawsuit filed in 2018 by people who accused the department of ignoring their applications for loan forgiveness through a federal program known as borrower defense to repayment. It provides automatic relief, including refunds of money paid to the federal agency and credit repair, to some 200,000 people. Another group of about 64,000 borrowers, who attended schools that are not on the department’s list, is entitled to receive decisions on their applications on rolling deadlines.

The colleges appealing the agreement had objected to the terms in July before court approval, saying the deal did not assess the validity of the borrowers’ claims and would damage their reputations. Adding to those arguments, the schools said in their recent motion that the Education Department is also violating federal procedures by circumventing its own rules for resolving borrower defense claims. They also say the department lacks the authority to grant widespread debt cancellation, an argument raised in the lawsuits seeking to overturn President Biden’s debt relief program.

“The department has undermined the rule of law, violated its own regulations, exceeded its statutory authority, and denied due process to institutions like ours, implying we had done something wrong,” Lincoln Educational Services wrote in a statement Tuesday. It said each former student’s claim should be assessed individually — and would probably be denied.

A statement from Everglades College, the parent entity of Keiser University and Everglades University, echoed these points. American National University did not immediately respond to requests for comment.

A spokesperson for the Education Department said the settlement will resolve claims in a “fair and equitable” manner for all parties.

“This appeal demonstrates just how desperate these schools are to deny justice for borrowers, and we will not stop fighting until students get the relief they deserve,” said Eileen Connor, director of the Project on Predatory Student Lending, a group representing the borrowers.

Connor said that the court’s decision to approve the settlement is “clear and unequivocal” and that she is confident the 9th Circuit will agree the claims brought by the schools are without merit.

U.S. District Judge William Alsup of the Northern District of California, who approved the settlement in November, on Tuesday set a conference call for Jan. 26 to discuss the motion and schedule a hearing.

Student loan forgiveness

The latest: The Supreme Court will review the legality of President Biden’s debt relief plan, after another appeals court rejected a bid to revive it. To date, Biden’s student loan forgiveness plan is on ice after a Texas judge blocked the student debt relief plan.

Calculate your eligibility: We tackled everything you need to know about the debt relief plan. Use this calculator to see how much of your student loan debt can be forgiven. Here’s what to expect in the student loan forgiveness application.

The opponents: What is happening to student loan forgiveness? A federal appeals court temporarily halted the student debt relief program. Six Republican-led states are also suing to overturn President Biden’s student loan forgiveness plan. An Indiana lawsuit was the first significant legal action seeking to invalidate Biden’s policy.

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