18 AGs sue DeVos, cite rules freeze
Democratic attorneys general from 18 states and the District of Columbia sued U.S. Education Secretary Betsy DeVos on Thursday over her decision to suspend rules that were meant to protect students from abuse by for-profit colleges.
The lawsuit, filed in federal court in Washington, says DeVos violated rule-making laws when she announced a June 14 decision to delay so-called borrower defense to repayment rules. The rules, which date from the 1990s, wipe away federal loans for students whose colleges used illegal or deceptive tactics to get them to borrow money to attend.
President Barack Obama’s administration revised the
rules last year to simplify the claims process and shift more of the cost of discharging loans onto schools. The revised rules were scheduled to take effect Saturday.
DeVos, in her announcement saying the rules would be delayed and rewritten, said they created “a muddled process that’s unfair to students and schools.”
Education Department spokesman Elizabeth Hill called the lawsuit by attorneys general “ideologically driven” and said the now-delayed rules suffered from “substantive and procedural flaws” that need to be addressed.
“That is why the Secretary decided it was time to take a step back and hit pause on these regulations until this case has been decided in court and to make sure these rules achieve their purpose: helping harmed students,” Hill said in a statement.
But consumer advocates and liberal lawmakers say the Obama-era changes achieve exactly that by speeding up loan discharges and having colleges foot more of the bill.
To limit financial risk to taxpayers, the new rules were to expand the conditions under which colleges have to get a letter of credit from a bank assuring the availability of at least 10 percent of the total amount of federal financial aid funds it receives. Among the circumstances that would trigger a letter are lawsuits filed by federal agencies, defaults on debt obligations and enforcement action taken by an accreditation agency.
“For almost two years, we worked with other state [attorneys general], schools, lenders, the department, a variety of stakeholders to come up with a rule that would protect students and ensure that schools and taxpayers would be treated fairly,” said Massachusetts Attorney General Maura Healey, who is leading the lawsuit against DeVos.
The rules also would have forbidden schools from forcing students to sign agreements that waive their right to sue. Defrauded students would have faced a quicker path to get their loans erased, and schools, not taxpayers, could have been held responsible for the costs.
A final version of the rules was announced last fall after nearly two years of negotiations. The Obama administration started pursuing new rules after the Corinthian Colleges chain shut down in 2015 after allegations of misconduct, leading to a flood of applications from students seeking to get their loans forgiven.
Healey said the regulation was a “common-sense measure” meant to protect students.
“Since day one of [President Donald Trump’s] administration, Secretary of Education Betsy DeVos and the administration have sided with for-profit schools over students,” Healey told reporters. “For me and my colleagues, it’s simple: When students and families are cheated out of an education and taxpayers foot the bill, everybody loses.”
Healey added: “It’s important that students have their day in court. All aspects of this rule are important and I’m concerned about any action to undermine or strip any of what’s in the borrower rule.”
AGENCY CITES LAWSUIT
The lawsuit says DeVos and the Education Department failed to take legally required steps to delay already established rules. It says they failed to open the decision to public comment and failed to provide an adequate legal justification for delaying the rules, among other faults.
In June, the Education Department said it was delaying the rule because a federal court was weighing a lawsuit filed by a California trade group made up mostly of for-profit colleges seeking to block the rules. The department cited a law allowing such a delay for litigation if it is determined “that justice so requires.”
The attorneys general said that justification is “a mere pretext” for repealing and replacing the regulation.
The other states that joined the lawsuit are California, Connecticut, Delaware, Hawaii, Iowa, Illinois, Maryland, Minnesota, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia and Washington.
Last week, a group of 47 Democrats in Congress, along with independent Sen. Bernie Sanders of Vermont, sent a letter to DeVos opposing the delay, saying the department had never used litigation as a reason to delay rules.
A separate lawsuit against the Education Department was filed Thursday on behalf of two former students of a Boston-area for-profit college. The suit says the students were counting on protections in the new rules to sue the New England Institute of Art, which they say deceived them and left them with few job prospects and heavy debt. The school’s parent company did not immediately comment.
“Secretary Betsy DeVos has effectively revoked students’ rights under the rule while giving a pass to predatory schools that wield influence with this administration,” said Julie Murray, an attorney for Public Citizen, a liberal think tank in Washington that’s representing the students.
The lawsuits set up a legal battle that has been brewing outside the courts for months. Advocacy groups and some congressional Democrats have been gearing up for a fight to preserve Obama-era rules that were intended to hold for-profit colleges accountable, while the Trump administration has sought to roll back regulations it sees as burdensome.
“Betsy DeVos is bending over backwards to make it easier for fly-by-night schools to cheat students and bury them in mountains of debt,” Sen. Elizabeth Warren, D-Mass., said in a statement Thursday. “Secretary DeVos might not like it, but her job is to serve students — and we will make sure she does.”
Last Friday, DeVos said she also was suspending the new “gainful employment” rule, another hallmark of the Obama administration that was set to take effect in July. The regulation would have cut off federal funding to career programs that consistently left students with more debt than they could afford. Data released by the Obama administration in January found that more than 800 programs across the country were failing to meet the rule’s standards.
Trump, who nominated DeVos, ran into trouble with his own for-profit Trump University. The now-closed school agreed in March to pay $25 million to settle a class-action lawsuit that affected about 3,700 former students.
Education Secretary Betsy DeVos testifies on Capitol Hill last month. DeVos’ decision to suspend rules meant to protect students from abuses by for-profit colleges drew a lawsuit Thursday.