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Three colleges are asking a federal judge to delay a settlement in a class action lawsuit against the U.S. Department of Education that argued the agency ignored borrower defense to repayment claims.
The colleges—Lincoln Educational Services Corporation, Everglades College Inc. and American National University—said last week that they would appeal the settlement, which canceled $6 billion in student loans for about 200,000 borrowers who attended one of 153 institutions, including those who are appealing. Most of the institutions on the department’s list, known as Exhibit C, are for-profit colleges or universities.
The colleges appealing aren’t a named party in the lawsuit, but they got involved with the litigation as intervenors, which allows them to object to the settlement. They are appealing to U.S. Court of Appeals for the Ninth Circuit.
“Intervenors do not wish to delay a legitimate settlement of this case or the granting of meritorious [borrower defense] claims, but they cannot accept an illegal settlement that unfairly harms their reputations and prejudices their rights, as this settlement does,” the colleges’ motion to stay pending appeal states.
The settlement was reached last summer, and a federal judge gave final approval to the agreement in November.
Lawyers for the three institutions argued in the motion to stay pending appeal that the court lacked the jurisdiction to approve the settlement, that Education Secretary Miguel Cardona doesn’t have the authority to discharge debts, that the settlement violates the due process rights of the colleges and that the intervenors will suffer irreparable harm without a stay.
“Intervenors are experiencing irreparable harm by being branded with the Exhibit C scarlet letter, and that harm will intensify after the settlement’s effective date,” the motion says. “The effective date triggers a sequence of events that includes providing notice to class members, granting BD claims en masse regardless of merit, discharging debts, and paying refunds.”
Eileen Connor, president of the Project on Predatory Student Lending, which initially filed the lawsuit, said in a statement that the court’s decision to approve the settlement was “clear and unequivocal.”
“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,” Connor said in the statement.
