The Supreme Court allowed an approximate $6 billion legal settlement to go forward that will cancel student loans for hundreds of thousands of borrowers who say their schools misled them.

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The class-action settlement was approved late last year by U.S. District Judge William Alsup in San Francisco in response to complaints that more than 150 schools had made false recruiting claims and left many students unable to find jobs.

The class-action settlement concerns loans that borrowers claim should be canceled because they were taken out based on misrepresentations made by their schools, many of which are for-profit. The settlement could be worth more than $6 billion. According to Reuters, three of the schools identified in the territory – for-profit Lincoln Educational Services Corp and American National University Inc as well as nonprofit Everglades College Inc – challenged the agreement after it was approved by a federal judge in California last November. Around 3,500 borrowers entitled to automatic loan discharge under the settlement attended one of the three schools.


It is important to note that this case is unrelated to President Joe Biden’s effort to forgive student loan debt, which is also before the justices, with a ruling due in the next two months. The Supreme Court is expected to deliver a verdict regarding the legal battle over President Biden’s loan forgiveness program in June. 

“The class-action settlement at issue here is a reasonable and statutorily authorized solution to the unprecedented problem posed by a flood of borrower-defense applications asserting a right to discharge under the applicable statute and regulations,” said Prelogar, the administration’s top Supreme Court lawyer.