State AG joining 18 others in suing U.S. education secretary

HARTFORD » Connecticut Attorney General George Jepsen is joining 18 other attorneys general in suing U.S. Education Secretary Betsy DeVos and the U.S. Education Department for abandoning a rule to hold colleges and universities accountable for abusive practices that helped them capitalize on federal student loans.

The Borrower Defense Rule was finalized by the Obama administration in November 2016 after nearly two years of negotiations, following the collapse of Corinthian Colleges, a national for-profit chain. The rule was designed to hold abusive higher education institutions accountable for cheating students and taxpayers out of billions of dollars in federal loans.

Under the rule, a successful enforcement action against a school by a state attorney general entitles borrowers to obtain loan forgiveness, and enables the U.S. Department of Education to seek repayment of any amounts forgiven from the school.

On June 14, the department announced its intent to delay large portions of the Borrower Defense Rule without soliciting, receiving, or responding to any comment from any stakeholder or member of the public, and without engaging in a public deliberative process, according to the attorneys general. The department simultaneously announced its intent to issue a new regulation to replace the Borrower Defense Rule.

“Fraud, especially fraud committed by a school, is

simply unacceptable,” DeVos said in a press release announcing the decision. “Unfortunately, last year’s rulemaking effort missed an opportunity to get it right. The result is a muddled process that’s unfair to students and schools, and puts taxpayers on the hook for significant costs. It’s time to take a step back and make sure these rules achieve their purpose: helping harmed students. It’s time for a regulatory reset.”

But 19 attorneys general don’t believe a regulatory reset is necessary.

“For several years now, Connecticut has been involved in a multistate investigation of the predatory practices of certain for-profit colleges and universities,” Jepsen said. “Our investigation, as well as inquiries conducted by Congress, have demonstrated how some of these institutions seek to maximize their access to federal taxpayer dollars by luring in students with misleading promises about the quality of the education they will receive and the prospects for their futures following completion of a program. These students end up in crushing debt, with worthless diplomas, while the for-profit colleges rake in exorbitant profits on the taxpayer dime.”

The rule provides a joint federal and state process for protecting students and providing relief to injured students. The attorneys general argue that delaying the rule’s implementation indefinitely deprives the states of benefits to their enforcement systems and injures the states’ residents by removing the rights and protections provided by the rule.

The federal government provides financial assistance in the form of loans to students pursuing higher education under Title IV of the Higher Education Act of 1965. These programs are designed to provide critical assistance to prospective students and expand access to higher education to students who could not otherwise afford to pursue a degree or certificate. These federal loans have become a significant source of revenue for many postsecondary institutions, including for-profit schools.

For-profit schools receive the vast majority of their revenue from the federal government in the form of federal student loans and grants. In 2009, the 15 publicly traded for-profit education companies received 86 percent of their revenues from taxpayer-funded loans. Taxpayers invested $32 billion in for-profit schools in the 2009-10 academic year, more than the annual budget of the U.S. Department of Justice and the U.S. Department of State during that time period.

The states, by and through their attorneys general, have initiated numerous investigations and enforcement actions against for-profit schools for violations of the states’ consumer protection statutes, alleging deceptive and coercive tactics used in recruitment efforts that typically target low-income and minority students and veterans. Many of these actions have resulted in judgments against the schools.

The case is being led by Massachusetts Attorney General Maura Healey.

“Since day one, Secretary DeVos has sided with for-profit school executives against students and families drowning in unaffordable student loans,” Healey said in a press release. “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.”

The case was filed in U.S. District Court for the District of Columbia.