A federal appeals court put on hold a Biden administration program to make it easier for defrauded borrowers to have their student debt canceled, WSJ Pro Bankruptcy reported. The New Orleans-based U.S. Court of Appeals for the Fifth Circuit on Monday issued an injunction freezing an initiative, known as the Borrower Defense to Repayment, while it hears a lawsuit by several Texas-based for-profit schools challenging the government’s ability to offer the program. Oral arguments are expected in November. The program allows students who have been misled by schools about job prospects or are victims of other types of fraudulent behavior and aggressive recruiting to have their federal debt canceled in full by the Education Department. Students applying for debt relief may have to wait longer for approval while the injunction is in place, if claims are processed at all. A spokesman for the Education Department didn’t immediately comment on the injunction. In court filings, the department said it was relying on debt-cancellation powers that the department has had for decades and that have been updated by several administrations. Put in place during the Obama administration, the program has been the target of litigation by students and for-profit schools. It was weakened under the Trump administration, whose Education Secretary, Betsy DeVos, was sued for failing to act on hundreds of thousands of outstanding student claims. The Biden administration revived the program with changes that streamline the process for borrowers to make claims and that allow them to apply for relief as part of a legal settlement. The Biden administration has canceled $14.7 billion in debt for 1.1 million borrowers, a figure that includes a major settlement of claims from students who sued the Trump administration. Last month, after new rules for the program went into effect, the administration approved $130 million in claims from 7,400 student borrowers who were enrolled at a Colorado chain of for-profit colleges.
