Borrower Defense to Repayment Rule Heads to U.S. Supreme Court While Student Loan Forgiveness Enters Final Rounds

Duane Morris 

January 23, 2025

Supreme Court Review of 2022 BDR Final Rule 

On January 10, 2025, the U.S. Supreme Court granted the Department of Education’s petition for a writ of certiorari to review the U.S. Court of Appeals for the Fifth Circuit’s decision in Career Colleges and Schools of Texas v. Department of Education that preliminarily enjoined, on a nationwide basis, the 2022 borrower defense to repayment (BDR) final rule. 87 Fed. Reg. 65,904 (Nov. 1, 2022). The scope of the Supreme Court case will be limited to the first question presented: “[w]hether the court of appeals erred in holding that the Education Act does not permit the assessment of borrower defenses to repayment before default, in administrative proceedings, or on a group basis.” The case will not involve the second question presented by the Department: “[w]hether the court of appeals erred in ordering the district court to enter preliminary relief on a universal basis.”

Career Colleges and Schools of Texas (CCST) initially filed its lawsuit on February 28, 2023, in the United States District Court for the Northern District of Texas to enjoin and vacate the 2022 BDR rule. See CCST v. U.S. Dep’t of Educ., 681 F. Supp. 3d 647 (W.D. Tex. 2023). Among its other claims, CCST argued that the final rule creates unlawful processes, fails to serve any legitimate purpose under the Higher Education Act and “represents enormous executive overreach” by the Biden administration in violation of the Department’s statutory authority and the Constitution’s separation of powers.

The plaintiffs sought a preliminary injunction, which was later denied by the U.S. District Court for the Western District of Texas. As a result, the plaintiffs pursued an interlocutory appeal to the Fifth Circuit. On April 4, 2024, the Fifth Circuit held that the District Court erred in its decision denying a preliminary injunction and, over the Department’s objection to nationwide relief, ordered the District Court to postpone the effective date of the 2022 BDR rule pending final judgment in the case. See CCST v. U.S. Dep’t of Educ, 98 F. 4th 220 (5th Cir. 2023). The Department sought rehearing in the Fifth Circuit, which was denied, and then petitioned the Supreme Court for review.

This is a key development in this lawsuit as the Supreme Court ruling likely will have significant consequences for institutions subject to the 2022 BDR rule. That regulation was a key initiative among the multiple student loan forgiveness efforts that the Biden administration undertook.

Biden Student Loan Forgiveness

Relatedly, on January 13, 2025, the Department announced the cancellation of loans for 150,000 borrowers, a majority of which are from the borrower defense process. On January 16, 2025, the Department then announced its final round of loan forgiveness for 4,550 borrowers through the income-based repayment plan and 4,100 individual borrower defense approvals. It remains to be seen what actions the second Trump administration may take to rollback or revise the Biden student loan forgiveness initiatives.

View Original Source