Education Department sued by states over loan program
Twenty-two states and the District of Columbia sued the Education Department on Wednesday, claiming it broke federal law in adopting new rules for a program meant to wipe out the student loan debt of borrowers whose schools defrauded them.
The new rule also “unreasonably favors the interests of predatory schools over students and would deny relief to borrowers who have been indisputably harmed by their schools,” according to the complaint filed in San Francisco federal court.
The suit was the latest legal battle over the decadesold program, known as Borrower Defense to Repayment, which allows students to ask that their federal loans be eliminated if their schools seriously misled them or violated state laws.
Education Secretary Betsy DeVos has called Borrower Defense a “free money” giveaway and repeatedly tried to slash the relief available through the program.
Last year, her agency finalized a policy revision that significantly raised the bar for new claims.
Among other changes, the new rule eliminated a group discharge process, forcing each borrower to pursue relief individually, and required applicants to prove both that their school had knowingly lied to them and that the deception caused them financial harm.
Those requirements “are so onerous that they make this defense impossible for a student loan borrower to assert successfully,” the state attorneys general wrote.
Angela Morabito, a spokeswoman for the Education Department, said: “This is yet another grandstanding, politically driven lawsuit meant to grab a cheap headline, and the media seems to always oblige. To any objective observer, our borrower defense rule clearly protects students from fraud, ensures they are entitled to financial relief if they suffered harm and holds schools accountable.”