Dept. of Education’s witch hunt against for-profit colleges impacts all colleges

Earlier this summer, the U.S. Department of Education proposed a rule that would give state and federal agencies the power to effectively run a college into the ground without even having to make an initial showing that the college has done anything wrong – and without giving the college a chance to defend itself.

If carried through, this corrosive and constitutionally questionable rule would destroy the educational opportunities that millions of students have chosen to pursue.

{mosads}The department’s proposal, instigated by the growing public chant demanding college debt relief, is buried in a 530-page rule known as borrower defense to repayment.

In just one section of the rule, if a single event on a laundry list of triggers should occur, a college must post a letter of credit accounting for a set percentage of its federal student loan revenue – or face losing federal funding. All colleges depend heavily on federal funding, so a triggering event could easily drive an institution into the ground and thus derail the students it serves in the process.

Another trigger on this long list is particularly disturbing: a lawsuit filed by a state or federal government entity. In essence, should this rule go through, the government could bankrupt a school simply by suing it. It doesn’t have to win the lawsuit; it doesn’t even have to show that it can survive a motion to dismiss. All the government has to do is file an action.

The spirit and effect of this proposed rule violates fundamental due process principles that are enshrined in the Constitution and have been articulated numerous times by the Supreme Court.  More fundamentally, the court, not the plaintiff, decides whether it is appropriate to ruin the defendant before the plaintiff has shown that its lawsuit has any potential merit.

Under this rule, the government agency effectively becomes judge, jury and executioner.

Americans are understandably frustrated by the high cost of college education, including those graduating from public and non-profit schools. But agency officials, many of whom are popularly elected at the state level, are now presented with the opportunity to capitalize politically on this frustration by bringing their own witch hunt against the most convenient scapegoat.

But, in our constitutional system, due process trumps political ambition and motives. A politically motivated agency head doesn’t get to be judge, jury, and executioner. If the agency can prove in a court of law that a college has acted illegally then of course the college should pay the price. But it’s wrong to deny colleges the opportunity to defend themselves before the government burns the future of their students’ education.

One more important point: while for-profit colleges are the clear target of this proposed rule, its language is so broad that all colleges and universities – public, non-profit and for-profit alike – are swept equally into the proposed rule’s web. In fact, non-profits with small endowments and law schools potentially stand the most to lose. As the Department of Education reviews comments and concerns about the onerous rule, balance must come into play. Guilty with no chance to be proven guilty is an obliteration of the Constitution.

Roel C. Campos is a former SEC Commissioner and now Partner at the law firm of Hughes Hubbard & Reed.

The views expressed by authors are their own and not the views of The Hill.