The Biden administration’s controversial move to forgive $6 billion in federal student debt by settling a class action lawsuit has drawn the scrutiny of two congressional committees. The lawmakers question the legality of the settlement and whether a top Department of Education (DOE) official involved had a conflict of interest in the case.
Meanwhile, 20 state attorneys general recently filed a brief supporting an appeal by schools seeking to overturn a judge’s approval of the Sweet settlement. “The executive branch does not have unlimited policymaking power, nor an unlimited bank account to forgive student loan debt. The executive branch cannot extend its authority as it sees fit,” the attorneys general wrote.
Sweet v. Cardona, filed in 2019, alleged the Trump administration’s DOE was unlawfully delaying the resolution of forgiveness claims filed by federal student loan borrowers under the department’s Borrower’s Defense to Repayment (BDR) program.
“The House Oversight and Education Committees have recognized the importance of this case and are now rightly investigating the Department of Education’s overreach of its authority,” said Jesse Panuccio of Boies Schiller Flexner, which represents Everglades College, one of several schools that appealed the Sweet settlement. “We believe strongly in the merits of our argument and that we will ultimately prevail.”
House Oversight and Accountability Committee Chairman James Comer (R-Ky.) and Committee on Education and the Workforce Chairwoman Virginia Foxx (R-N.C.) wrote to Sec. of Education Miguel Cardona announcing their investigation. They called the department’s position in the Sweet v. Cardona class action suit “very concerning” and said the deal might constitute a “legally dubious” effort to use the courts to achieve President Joe Biden’s promise to cancel federal student debt.
The letter also expressed concern about coordination between the Biden DOE and plaintiffs “to engineer a mutually desired outcome at the expense of taxpayers and institutions of higher education.” Those eyebrows were raised by the central role in the Sweet settlement played by DOE Deputy General Counsel for Post Secondary Education Toby Merrill. Before joining the Biden administration, Merrill founded the legal advocacy group that filed the original Sweet class action, Harvard’s Project on Predatory Student Lending (PPSL).
PPSL has ties to the former Obama administration DOE officials who created the BDR policy. The initiative is designed to provide recourse for student borrowers who can demonstrate that their school misled them or otherwise violated applicable laws and regulations.
The Biden administration, which has made federal student debt forgiveness a central tenet of its domestic policy, agreed in June 2022 to settle Sweet with the unquestioned acceptance of 200,000 pending BDR claims. The Sweet plaintiffs and the Biden DOE reached the deal in secret. In a break from the Obama-era BDR policy, the proprietary schools alleged to have misled students were not allowed to present a defense. In fact, the 151 schools listed in the settlement were notified of the agreement just one day before its announcement.
In January, Lincoln Educational Services Corp., American National University, and Everglades College, Inc., all of whom appeared on the settlement agreement’s list of 151 schools, appealed the approval of the deal, which was granted by U.S. District Judge William Alsup of the 9th Circuit Court (Northern California). The schools also asked for a delay of the $6 billion taxpayer payout until their appeal is resolved. The plaintiffs argue the settlement has damaged their reputations and that mass approval of BDR claims denies schools the right to defend themselves. In February, Judge Alsup denied the request for a payout delay but allowed the appeal to go forward.
As a first step in the inquiry, the Oversight and Education committees have requested numerous documents from the DOE, including all communications between the White House and DOE about the Sweet settlement and all ethics documents related to Merrill and other DOE staffers who worked in the Sweet settlement.
Nicholas Kent, Chief Policy Officer with the Career Education Colleges and Universities (CECU) organization says the original settlement was unfair to the entire for-profit education industry.
“The Biden administration entered into an unlawful settlement to discharge $6 billion for approximately 200,000 borrowers that branded 150 institutions with some sort of scarlet letter without providing the due process those schools are entitled to under the Department of Education’s own regulations,” Kent said. “We are pleased that both members of Congress and the Ninth Circuit Court of Appeals are closely examining this improper action, especially since the administration continues to stonewall attempts by outside entities to get answers to basic questions.”
In their amicus brief filed last month in the United States Court of Appeals for the Ninth Circuit, the state attorneys general argue DOE’s Sweet settlement constitutes an improper “strategic surrender” that allowed the executive branch to act beyond its authority and without the Constitutionally-required Congressional engagement.
According to the brief, “[W]hen the executive branch attempts to gain new power through a settlement, courts can either refuse to approve the settlement (which is what the District Court should have done in this case) or else vacate the settlement on appeal (which is what this Court, and the Supreme Court if necessary, should do in this case).”
The brief was filed by the attorneys general of Ohio, Alabama, Alaska, Arkansas, Florida, Georgia, Idaho, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Montana, North Dakota, Oklahoma, South Carolina, Texas, Utah, West Virginia, and Wyoming.