18 States Are Suing Betsy DeVos Over Delayed Student Loan Protections

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Hit with a federal lawsuit about its deceptive ads that resulted in the institution forgiving millions in debt and offering millions more in refunds to its students, DeVry is one of many for-profit colleges that have drawn the ire of the regulators and watch-dog groups. That small victory was cheapened last week when the Department of Education announced a delay in a number of regulations first finalized by the Obama administration. In response, 18 states are now suing Secretary of Education Betsy DeVos.

The federal lawsuit, filed by the District of Columbia along with those states, “accuses DeVos of illegally delaying the regulations aimed at predatory colleges” that were “meant to protect federal student loan borrowers defrauded by their schools.” The rules, known as “borrower defense to repayment,” make it easier for defrauded student loan borrowers to get debt forgiveness and let students resolve complaints against their schools in courts. Per the New York Times:

An existing federal law allows borrowers to apply for loan forgiveness if they attended a school that misled them or broke state consumer protection laws. Once rarely used, the system was overwhelmed by applicants after the wave of for-profit failures. Corinthian’s collapse alone led to more than 15,000 loan discharges, with a balance of $247 million.

Taxpayers get stuck with those losses. The rules that Ms. DeVos froze would have shifted some of that risk back to the industry by requiring schools at risk of closing to put up financial collateral. They would also ban mandatory arbitration agreements, which have prevented many aggrieved students from suing schools that they believe have defrauded them.

In announcing the delay, DeVos said the rules created “a muddled process” and a burden on taxpayers and the Department of Education would soon rewrite the rules. DeVos also cited a pending California lawsuit by a group representing pro-profit colleges as a reason for the delay. In response, the state AGs have asked a federal court to put the rules into place at once.

“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. “Her decision to cancel vital protections for students and taxpayers is a betrayal of her office’s responsibility and a violation of federal law.”

“These rules served as critical protections against predatory for-profit schools that exploit hardworking students – students who are simply trying to invest in their own education and future,” said New York Attorney General Schneiderman. He added, “When Washington abdicates its responsibility to protect New Yorkers, we won’t hesitate to step in.”

The AGs who filed the lawsuit are from California, Connecticut, Delaware, Hawaii, Iowa, Illinois, Maryland, Massachusetts, Minnesota, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington, and the District of Columbia.

(via Politico & New York Times & NPR)