- The Supreme Court declined to intervene in a settlement that would have allowed thousands of borrowers to have their student loan obligations erased.
- The settlement, which may exceed $6 billion, resulted from a lawsuit filed by borrowers who claimed they were misled into taking out loans by their schools.
- Borrowers should be prepared for long wait times when student loan payments start,
The Supreme Court did not intervene in a $6bn student debt settlement on Thursday that would have enabled thousands of borrowers to have their loan obligations erased.
In a short ruling, according to a report from NBC News, the US supreme court won't halt the $6bn student debt settlement agreed upon by educational institutions.
In the next two months, the Supreme Court will issue a verdict on a separate case unconnected to this one, which involves President Joe Biden's larger endeavor to cancel student loan debt.
Many students at for-profit institutions have joined a class action lawsuit, claiming they were misled into taking out loans by their schools. The value of the settlement may exceed $6 billion.
In November, US District Judge William Alsup of California granted a settlement in a lawsuit filed by borrowers, which gave birth to the current situation. The Biden administration has begun carrying out the settlement.
Different Student Loan Forgiveness Programs
Everglades College, Lincoln Educational Services Corp., and American National University applied to the Supreme Court. Everglades is a nonprofit organization, whereas Lincoln and American National are for-profit businesses.
Each of the three owns and operates one of the more than 150 educational facilities the federal government has connected to allegations of "substantial misconduct," per Forbes.
Opponents had claimed that the Biden administration's decision to settle for $6 billion in student loan forgiveness was identical to a separate, broader program that would cancel student loans for millions of borrowers at the $10,000 or $20,000 level.
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Legal objections to the scheme, which may cost as much as $400 billion, are already being considered by the Supreme Court. It has been contended in court filings filed this week by both the Biden administration and the class of student loan debtors that the two programs are fundamentally different in scope and legal foundation.
Advisory For Student Loan Borrowers
Meanwhile, borrowers of US student loans should be prepared to hold, maybe for a very long time, when payments start in a few months.
The Department of Education recently renegotiated its contracts with loan servicers, decreasing the number of hours customer service centers must be available each week. The money loan servicers are paid to each borrower serviced, USA Today reported.
These reductions are unfortunate timing, given that millions of borrowers must contact their loan servicer once payments start. The Supreme Court is still debating the legality of the scheme. In the following months, a decision should be made.
When borrowers have questions or concerns about their student loans, they contact their servicer first. Servicers work with borrowers to find manageable repayment plans and handle the administrative aspects of monthly student loan payments.
According to Scott Buchanan, executive director of the nonprofit trade group Student Loan Servicing Alliance, the situation will be "very busy" for the next few months with more prolonged hold times.
"It's just a matter of whether it will be 30 minutes or two hours," he noted
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