US Department of Education faces legal challenges over student loan relief

The US Department of Education is facing significant legal developments regarding student loan forgiveness. A class action lawsuit has been filed by former students represented by the nonprofit Student Defense. The plaintiffs allege the department has failed to discharge loans for borrowers who attended closed for-profit colleges, including those owned by Career Education Corporation, Education Management Corporation, Education Corporation of America, and Bay State College. The suit centers on a federal decision that expanded eligibility for relief after these institutions closed under “exceptional circumstances.”

In a separate development, the Department of Education has withdrawn its appeals regarding court decisions that struck down proposed regulations intended to restrict the Public Service Loan Forgiveness (PSLF) program. The proposed rules would have allowed the Secretary of Education to disqualify employers from the program if their activities were deemed to have a “substantial illegal purpose.” The withdrawal of these appeals leaves previous court rulings intact, maintaining the current structure of the PSLF program, which allows for loan discharge after 120 qualifying payments while working for eligible nonprofit or government employers.