Nineteen Democratic state attorneys general are suing Secretary of Education Betsy DeVos over rescinded student loan regulations.
The complaint, filed in U.S. District Court, alleges that the Department of Education violated federal law by abruptly rolling back its Borrower Defense to Repayment rule, which was designed to hold abusive higher education institutions accountable for cheating students and taxpayers out of billions of dollars in federal loans. The Obama-era rule, finalized in November 2016, was meant to better protect student borrowers against misleading and predatory practices by creating consistent, clear, fair and transparent processes to file claims.
{mosads}But it angered for-profit institutions, which claimed it was unfairly punitive because it established automatic triggers requiring a school to put up a letter of credit — a large sum of money — every time a lawsuit is filed against it to protect taxpayers if the institution fails.
“Since day one, Secretary DeVos has sided with for-profit school executives against students and families drowning in unaffordable student loans,” Massachusetts Attorney General Maura Healey said in a statement Thursday.
“Her decision to cancel vital protections for students and taxpayers is a betrayal of her office’s responsibility and a violation of federal law. We call on Secretary DeVos and the U.S. Department of Education to restore these rules immediately.”
DeVos announced last month that her department was planning to re-do both the borrower defense rule and the Gainful Employment Rule, which requires schools to ensure their career training programs actually prepare students for well-paying jobs that allow them to pay back their student loans.
Consumer advocacy groups have also filed a lawsuit in the U.S. District Court for the District of Columbia, accusing DeVos of having violated the Administrative Procedure Act by postponing the Borrower Defense to Repaying rule, which was set to take effect on July 1.
Public Citizen and the Project on Predatory Student Lending filed their lawsuit on behalf of Meaghan Bauer and Stephano Del Rose, former students of the for-profit New England Institute of Art (NEIA) in Brookline, Mass.
The students claim NEIA, which is owned by Education Management Corporation (EDMC), engaged in unfair and deceptive practices that left them and other students with a useless education, few job prospects and significant debt.
They students also claim they have a federal right to have the Education Department cancel their loans as a result of the school’s unlawful conduct.
The groups say the students were counting on the borrower defense rule to give them their day in court. The rule prohibits schools that receive federal funds from relying on existing agreements or entering into new contracts with their students that include forced arbitration provisions. The clauses, often slipped into the fine print, waive the student’s right to participate in class action lawsuits.
“Secretary Betsy DeVos has effectively revoked students’ rights under the rule while giving a pass to predatory schools that wield influence with this administration,” Julie Murray, a Public Citizen attorney representing the plaintiffs, said in a statement. “We are asking the court to order this administration to implement the rule now, as the law requires.”
–Mallory Shelbourne contributed to this report, which was last updated at 11:24 a.m.