An appeals court blocks a debt relief plan for students who say they were misled by colleges

NEW ORLEANS (AP) — A Biden administration plan to provide student debt relief for people who say they were victims of misleading information by trade schools or colleges is “almost certainly unlawful” a federal appeals court said in a ruling blocking enforcement of the policy against a group of privately owned Texas institutions.

The 5th U.S. Circuit Court of Appeal ruling, dated Thursday, came in a court challenge filed by Career Colleges and Schools of Texas. The panel sent the case back to a lower court, saying the judge should issue an injunction against enforcement while the appeal continues.

At issue are rules that broadened existing policy, affecting students who borrowed money to attend colleges and universities that are determined to have misled them on matters such as whether their courses would actually prepare them for employment in their field or the likely salary they would earn upon obtaining a degree. According to the opinion, if a federal student loan is discharged under the policy, the government can seek reimbursement from the school accused of the misleading practices.

Backers of the regulations say the changes made under President Joe Biden were needed to provide relief to students who were victimized by predatory policies at for-profit post-secondary education providers.

Career Colleges and Schools of Texas said the rules are so broad that they cover even unintentional actions by a college. They also said the rule unconstitutionally gives an executive branch agency, the Department of Education, what amounts to the power of a court in deciding whether to grant claims for debt relief.

Judge Edith Jones agreed in a 57-page opinion that focused in part on what she said were broad and vague rules.

“The unbridled scope of these prohibitions enables the Department to hold schools liable for conduct that it defines only with future ‘guidance’ documents or in the course of adjudication,” Jones wrote. "Simply put, the statute does not permit the Department to terrify first and clarify later.”

The appellate panel included Jones, appointed to the court by former President Ronald Reagan and judges Kyle Duncan and Cory Wilson, appointed by former President Donald Trump.