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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.

Americans borrowed more than ever on their credit cards in the last quarter, the New York Federal Reserve Bank said on Tuesday, with balances surpassing $1 trillion for the first time even as overall household debt loads were largely unchanged, Reuters reported. Credit card balances rose by $45 billion to $1.03 trillion in the second quarter, the regional Fed bank said in its latest quarterly household debt and credit report, reflecting robust consumer spending as well as higher prices due to inflation, researchers said. Household debt ticked up 0.1% to $17.06 trillion, as mortgage balances — the biggest portion, and typically the biggest driver, of overall household debt — were largely unchanged. Meanwhile, credit card delinquencies are at an 11-year high, as measured using a four-quarter average, the data showed. But the quarter-to-quarter trend appeared less alarming, with New York Fed researchers noting a leveling out near pre-pandemic levels in the most recent two quarters. Though rising balances will challenge some borrowers, and student loan borrowers may be squeezed as student loan repayments resume this fall, they wrote, "household credit shows some early signs of stabilizing at pre-pandemic health, albeit with higher nominal balances." Student loan balances declined by $35 billion to $1.57 trillion in the second quarter, the data showed. New York Fed researchers attributed the decline to the timing of the academic year, as well as to some small forgiveness programs kicking in.

Private student loan borrowers who filed for bankruptcy are finally getting some relief from student loan provider, Navient Corp., to the tune of $198 million, YahooFinance.com reported. Navient settled a lawsuit with borrowers who alleged the company illegally collected on private student loans by falsely telling borrowers that their loans were not discharged in bankruptcy. The settlement includes $182 million in debt relief and $16 million cash compensation for impacted borrowers along with help to improve their credit scores as a result of the illegal collections. The settlement affects borrowers who had private student loans with Navient that were discharged in bankruptcy. Eligible borrowers identified by Navient will receive notices and debt relief will be automatic.

U.S. consumer borrowing increased in June by more than forecast on the biggest gain in non-revolving credit in eight months, Bloomberg News reported. Total credit rose $17.8 billion on the heels of the smallest monthly increase since 2020 in the prior period, Federal Reserve data showed Monday. The figure, which isn’t adjusted for inflation, exceeded the $13 billion median forecast in a Bloomberg survey of economists. Non-revolving credit, such as loans for school tuition and vehicle purchases, jumped $18.5 billion following a modest advance in the prior month. Auto sales increased in June from a month earlier, according to separate data. The Fed’s survey showed that the value of loans for vehicle purchases increased to a fresh record in the second quarter. Student loans, meanwhile, fell. Revolving credit outstanding, which includes credit cards, decreased $604.5 million, the first decline in more than two years.

The Education Department and the Colorado attorney general on Tuesday announced $130 million in automatic debt discharge for 7,400 Colorado student loan borrowers who attended CollegeAmerica, YahooFinance.com reported. Based on evidence gathered by the Colorado attorney general’s office, the Education Department found that CollegeAmerica’s parent company — the Center for Excellence in Higher Education (CEHE) — made misrepresentations about graduates’ salaries and employment rates, its programs, and the terms of private loans it offered borrowers. Eligible borrowers were enrolled at Colorado-based locations of CollegeAmerica from Jan. 1, 2006, to July 1, 2020. It doesn’t apply to borrowers who attended CollegeAmerica campuses outside of Colorado, senior department officials said in a press call. Discharge also only applies to federal student loans, not private loans or commercial FFEL loans.