Thousands of student-loan borrowers are facing 'obvious harm' if the Supreme Court agrees to halt the debt relief they already won in court, Biden's Education Department says

The Education Department blasted three schools' request to halt $6 billion in student-debt relief for 200,000 borrowers who said they were defrauded.

• The Education Department pushed back on a lawsuit to halt student-debt relief for borrowers who said they were defrauded.
• A federal judge signed off on a settlement that would give those borrowers $6 billion in debt relief.
• The schools who filed the lawsuit said they were not given "due process" to respond to the claims.

President Joe Biden's Education Department has now responded to the latest student-debt relief challengers.

At the end of March, three schools asked the Supreme Court to halt the disbursement of student-debt relief in a years-long settlement known as Sweet vs. Cardona. The lawsuit, first filed in 2019 under former President Donald Trump, was filed on behalf of borrowers who had stalled borrower defense claims, or claims a borrower can file if they believe they were defrauded by the school they attended. If approved, their debt from the school would be wiped out.

The Education Department agreed to the settlement last summer, and in November, a federal judge signed off on $6 billion in debt relief for 200,000 borrowers. But three schools named in the settlement — Lincoln Educational Services Corp, American National University, and Everglades College — appealed the decision, most recently taking it to the Supreme Court. They argued they were not given "due process" to respond to the claims made against them and said they would suffer reputational harm, asking for the nation's highest court to stay the relief as the appeals process plays out.

On Wednesday, the Education Department responded to the schools' appeal, and as expected, it told the Supreme Court that staying the relief will cause "obvious harm" for impacted borrowers and the department itself.

"Applicants' cavalier suggestion that any further delay could not matter to them ignores the weight of financial uncertainty those borrowers will continue to experience until the settlement's discharges are effectuated," the department wrote in its legal filing.

"Given the strong interest in moving forward, and consistent with the agreement's binding terms (including deadlines), the Department has already begun implementing the settlement by notifying class members that they will receive discharges, directing loan servicers to start processing those discharges, updating its own internal systems to reflect the rescission of previous denials, and beginning the adjudication process for those reopened cases through the settlement's streamlined procedures," the department wrote.

"The whipsawing that would occur if the settlement were stayed would cause confusion among the affected borrowers, loan servicers, and the public and would undermine the Department's ability to effectively implement the borrower-defense program," it added.

As the department noted, it has deadlines within the settlement to get each class of borrowers the relief they won. If a borrower attended a school included on this list, their relief will be automatic, and all other borrowers will receive relief adherent to this timeline.

Still, the schools want that process to be halted, and they argued that the Education Department is overstepping its authority by implementing this relief, comparing it to Biden's broad plan to cancel up to $20,000 in student debt for federal borrowers. The Supreme Court heard oral arguments in a case aiming to block that broader relief in February.

Twenty GOP-led states also backed the schools' request, saying in an amicus brief to the Supreme Court that the "settlement showers class members and other borrowers with concessions and handouts beyond what the class members could have dreamt of winning after a trial."

The case sits with Justice Elena Kagan, who can choose to dismiss it or take it on for consideration.