Fifth Circuit Continues Nationwide Preliminary Injunction Against “Almost Certainly Unlawful” Borrower Defense Rule

McGuire Woods

April 10, 2024

On April 4, 2024, the U.S. Court of Appeals for the Fifth Circuit issued its opinion in CCST v. U.S. Dept. of Education, reversing the order of the U.S. District Court for the Western District of Texas, and granting a preliminary injunction against the 2022 Borrower Defense to Repayment (BDR) Rule (the 2022 Rule).

The Fifth Circuit held that the 2022 Rule will likely cause irreparable harm to schools and that the plaintiff association is likely to prevail on the merits in the case currently pending in the Western District of Texas.

The Fifth Circuit also held that the preliminary injunction would not be party-restricted and, as a result, would postpone the enforcement of the rule against any institution that receives federal funds under Title IV of the Higher Education Act of 1965, as amended.

Background

On November 1, 2022, the U.S. Department of Education promulgated a final rule that revised the framework for BDR claims as well as other regulatory provisions. The 2022 Rule included BDR provisions that allowed for group discharge claims as well as claims filed by “third-party requestors” on behalf of borrowers. The 2022 Rule established three rebuttable presumptions: “that each member of the group knew about the particular claimed borrower defense; that each member relied on the representation, omission, or other act; and that each member’s reliance was reasonable.”

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