N.M. AG joins lawsuit over for-profit college debt
U.S. Education Department stalls rules that would provide relief to students
New Mexico has joined 17 other states and the District of Columbia in filing a federal lawsuit against the U.S. Department of Education and its secretary, Betsy DeVos, for delaying new regulations that would streamline the process for providing relief to students with outstanding loans at fraudulent for-profit colleges and universities.
The suit, filed Thursday in a federal District Court in Washington, D.C., by 18 Democratic attorneys general, argues that by delaying or eliminating changes to a rule known as “borrower defense,” DeVos is violating rule-making procedures, denying protections for students and failing to deter abusive practices by higher education corporations that increasingly have come under scrutiny.
Many of these corporations have been accused of using false information about job placement rates, transferable credits and other issues to recruit students. The students defrauded by such predatory practices are disproportionately low-income and minority people, the lawsuit says.
The suit comes just a day after New Mexico Attorney General Hector Balderas and California Attorney General Xavier Bacerra jointly filed a suit against the U.S. Department of the Interior, accusing that agency of illegally postponing methane regulations enacted under the Obama administration.
The federal lawsuit also comes just months after two groups of students from the Santa Fe University of Art and Design sued that for-profit school and its parent company, Laureate Education Inc., accusing it of fraud and breach of contract for deciding to shut down after the spring 2018 semester. Hundreds of students scrambled to find a new school for the upcoming year that would accept their credits. Many were attending the university on nontransferable scholarships — some of which were supposed to cover full tuition costs for four years.
The overhauled borrower defense rule, authorized Nov. 1 by the Obama administration and scheduled to take effect this month, followed a wave of shutdowns by for-profit school chains, including giants ITT Technical Institute and Corinthian Colleges Inc., that left students at campuses in New Mexico and across the nation with what many thought were useless degrees — or thousands of dollars worth of debt and no degree.
Corinthian and ITT Tech both faced sanctions from the federal government following investigations, as well as civil lawsuits. The state of California won a judgment of more than $1 billion against Corinthian last year for misleading students in its advertising. Suits against ITT Tech are still pending.
DeVos said in May that she was revisiting the borrower defense rule with the possibility of rewriting it. The Obama administration’s changes created a “muddled process that’s unfair to students and schools,” she said.
A month later, the California Association of Private Postsecondary Schools, a coalition of for-profit colleges, filed a lawsuit against the Department of Education in an effort to stop the federal government from implementing the rule. DeVos then announced she was delaying it.
In a news release issued Thursday, Balderas said he joined the suit to protect “New Mexico students [who] fall victim to predatory, out-of-state educa-
tion companies [that] seek to harm them and drown them in unnecessary debt.”
Balderas is among several attorneys general who have been cracking down on forprofit schools. In April, he announced that more than 570 New Mexico students who had attended Corinthian-run colleges were eligible for cancellation of their federal student loans.
But thousands more may be affected by predatory practices of for-profit schools that have closed down or are in danger of closing.
In an email, Attorney General’s Office spokesman James Hallinan said, “Our Office is currently investigating exactly how many students are struggling to pay off loans from these for-profit institutions. However, we are aware of thousands of New Mexicans who are impacted by the inability to pay off these types of loans.”
“With the rise of this type of student debt,” his email said, “we are seeing a rise in the amount of scams and fraud occurring around promises to relieve students from the heavy burden with which these schools have saddled them.”
The overhauled borrow defense rule, Hallinan said, would “give our office another tool to help fight the economic harm bad business does to our state and put money back in New Mexicans’ pockets rather than in the pocket of fraudulent business and scammers.”
Other states joining the suit are California, Connecticut, Delaware, Hawaii, Iowa, Illinois, Maryland, Massachusetts, Minnesota, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Washington, Vermont and Virginia.