5th Circuit Rules Against Department’s “Almost Certainly Unlawful” Borrower Defense Rule

This afternoon, the Fifth Circuit published its opinion deciding the appeal from the denial of the preliminary injunction in CCST v. U.S. Dept. of Education, reversing the District Court and ordering that the effective date of the Biden administration’s Borrower Defense to Repayment Rule (BDR Rule) be pushed back until the case is fully resolved. As a result, the stay pending appeal that has been in place since last July will now become a preliminary injunction that will remain in place while the case returns to the District Court for summary judgment proceedings.

The Fifth Circuit held that the Biden BDR Rule would cause irreparable harm to schools without a preliminary injunction and that the District Court erred in finding no irreparable harm. The Fifth Circuit also held that CCST is likely to prevail on the merits of the case in the District Court. As a result, the Fifth Circuit granted CCST a preliminary injunction and instructed the District Court to “postpone the effective date of the borrower-defense and closed-school discharge provisions of the rule” until the conclusion of the case before the District Court.

In its analysis of the likelihood of success on the merits, the Fifth Circuit concluded that several aspects of the Biden BDR Rule likely violate the Higher Education Act because they go well beyond the authority granted by Congress to the Department. These “almost certainly unlawful provisions of the Rule” include “the promulgation of broad affirmative defenses to repayment,” the provision of “full discharges and consolidated discharges that expand into a damages remedy,” “[t]he vagueness of the Rule’s liability standards,” “the strict liability standard established by the Rule,” the “eliminat[ion] of an intent requirement,” the “adjudicat[ion] of borrower defense claims or recoupment claims by the Department against schools,” the evidentiary presumptions that apply to group claims adjudications, and the closed school provisions. The Fifth Circuit also noted that the BDR Rule “seems to be of a piece with the Executive Branch’s larger goal to sidestep, to the greatest extent possible, the Supreme Court decision holding Presidential student loan discharges illegal in Biden v. Nebraska.”

As the case returns to the District Court, these broad statements in the Fifth Circuit opinion make it more likely that the District Court will rule in favor of CCST on summary judgment, or if the District Court rules against CCST on summary judgment, that CCST can successfully appeal from that decision. In addition, the breadth of the Fifth Circuit’s statements and the fact that several of them apply to aspects of the Rule that were also features of the Obama administration’s BDR Rule suggests that the Court could be inclined at some future point to roll those features back to the baseline of the 1994 Rule, which was much more limited and hewed much more closely to the text of the statute.

The Fifth Circuit opinion was written by Circuit Judge Edith Jones and joined in full by Circuit Judges Kyle Duncan and Cory Wilson. In the District Court the case is before Judge Robert Pittman, who initially denied CCST’s request for a preliminary injunction.

We encourage all CECU member schools that have benefitted from the success of the lawsuit to consider donating here to continue to support the case through the next phase of litigation before the District Court, and to encourage other schools that are benefitting from the preliminary injunction to do the same. CECU will continue to provide updates as the case progresses.

GR Contacts

Jed Brinton, Senior Vice President and General Counsel, [email protected]

Jordan Wicker, Senior Vice President of Government Regulatory and Legislative Affairs, [email protected]

Joanne Zurcher, Vice President of Government Relations, [email protected]