States Sue DeVos Over Suspension Of Student Loan Protections

Michele Moreno
July 8, 2017

Attorneys general from California, Massachusetts, New York and 15 other states filed suit against Education Secretary Betsy DeVos and her department Thursday, accusing DeVos of breaking federal law and giving free rein to for-profit colleges by rescinding the Borrower Defense Rule.

Consumer groups Public Citizen and Project on Predatory Student Lending sued on Thursday to lift the delay as well.

These rules provide "updates to a regulation known as the borrower defense to repayment", which was established in the 1990s. But despite the extensive and proper effort put into crafting the rule, the Trump Administration has unilaterally and illegally suspended its implementation. The Education Department did not immediately respond to a request for comment.

The Borrower Defense Rule, finalized last fall under former President Barack Obama's administration, was supposed to be effective July 1, but DeVos previously said the DOE would delay implementing the rule, possibly in favor of instituting its own rule. Some colleges, DeVos said, were concerned they could be unfairly affected.

Healey is joined in the case by the attorneys general of Massachusetts, California, Connecticut, Delaware, Hawaii, Iowa, Illinois, Maryland, Minnesota, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington, and the District of Columbia. Bauer and Del Rose have been waiting for the rules to be enacted so they could file their lawsuit.

A group of 19 Democratic attorneys general have banded together to sue Education Secretary Betsy DeVos after she delayed the implementation of an Obama-era federal rule created to protect students from predatory loans offered by for-profit colleges.

The rule was designed to protect student loan borrowers from for-profit schools engaging in "misleading and predatory practices" by creating a process to discharge their loans in cases of institutional misconduct and school closings.

Schools that exceeded the limits would risk losing their ability to offer federal student aid.

According to the Department of Education, the rules will be reviewed by the end of 2017.

"Despite the high costs of for-profit programs, students attending for-profit institutions often fail to realize the returns on their investment in education-facing high default rates on their loans and high unemployment rates after leaving school", the complaint continued. "The loss of rights and protections also causes substantial injury to students who can not avail themselves of the rule's new streamlined process for obtaining loan discharges, and who will enroll in abusive institutions without receiving the warnings and information necessary to make an informed enrollment decision".

The regulation is widely disliked by for-profits, but it has also been criticized by some other vulnerable colleges, like historically black schools, who say it puts a financial burden on colleges without providing them due process when students allege fraud. And weeks later, in mid-June, the Education Department announced it would indefinitely delay large portions of the rule.

In addition, the protections prohibit schools from forcing students into arbitration or requiring them to waive participation in class action lawsuits. The Obama administration estimated the loan relief program would cost about $16.6 billion over the next 10 years. The rule would allow borrowers to have their loans forgiven if a state has successfully taken action against a for-profit school.

Other reports by Insurance News

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