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19 AGs Sue Education Department Over Student Loan Rule

Education Secretary Betsy DeVos testifies on Capitol Hill in Washington on May 24, 2017, before the House Appropriations Labor, Health and Human Services, Education, and Related Agencies subcommittee.

Education Secretary Betsy DeVos testifies on Capitol Hill in Washington on May 24, 2017, before the House Appropriations Labor, Health and Human Services, Education, and Related Agencies subcommittee. AP Photo/Carolyn Kaster


Connecting state and local government leaders

The lawsuit calls the Education Department's delay of the so-called Borrowers Defense rule "mere pretext for repealing" the regulations.

Attorneys general from 18 states and the District of Columbia filed a lawsuit against the U.S. Department of Education and Education Secretary Betsy DeVos on Thursday, alleging the department has unlawfully delayed new regulations meant to ease the process for forgiving federal student loan debt when schools engage in misconduct.

The regulations also contain provisions to protect student borrowers from misleading and predatory practices by colleges and other postsecondary schools. And they are designed to shift financial risks tied to canceled loans away from taxpayers and toward schools, in situations where schools are headed for financial trouble or have harmed students.

It was last October, toward the end of then-President Obama's time in office, when the Education Department unveiled the finalized "borrower defense" rules.

The regulations were set  to take effect July 1. But the department said in a notice published last month that it would postpone their full implementation because the rules were facing a court challenge.

That court case was brought by the California Association of Private Postsecondary Schools, or CAPPS, whose members include both for-profit and nonprofit institutions. Among the claims the group makes in its lawsuit is that the borrower defense rules exceed the Education Department's legal authority and conflict with federal arbitration laws.

In their complaint, the attorneys general argue that citing the CAPPS litigation as a reason for delaying the regulations is "mere pretext for repealing the Rule and replacing it with a new rule that will remove or dilute student rights and protections." They ask the court to vacate the delay notice and to order that the rules be promptly implemented.

Massachusetts Attorney General Maura Healey is leading the coalition of states that filed the lawsuit on Thursday.

“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 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."

The education department described the lawsuit as "ideologically driven."

"The state attorneys general are saying to regulate first, and ask the legal questions later—which also seems to be the approach of the prior administration that adopted borrower-defense regulations through a heavily politicized process and failed to account for the interests of all stakeholders," department press secretary Liz Hill said in a statement.

"The borrower-defense regulations suffer from substantive and procedural flaws that need to be considered before imposing new burdens on regulated parties," she added. 

Hill also said the rules would cost taxpayers billions of dollars in the next decade and that the department could not simply dismiss the allegations in the CAPPS case.

Federal efforts to come up with the new borrower defense rules began after the Education Department received an influx of borrower defense claims following the closure of Corinthian Colleges Inc., a for-profit educational company.

State and federal investigators found that Corinthian had violated state and federal laws, some of which had to do with advertising, recruitment and providing financing to students.

The company went out of business in 2015 amid bankruptcy proceedings.

As of last October, the Education Department had approved 15,694 loan forgiveness claims tied to Corinthian's collapse. These canceled loans were worth about $247 million.

The lawsuit by state attorneys general was filed in U.S. District Court in the District of Columbia.

In addition to Massachusetts and the District of Columbia, the attorneys general that brought the suit are from California, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maryland, Minnesota, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia and Washington.

All of the attorneys general from those states are Democrats except for Doug Chin, of Hawaii, who does not officially have a party affiliation.

This post has been updated with comment from the Education Department and other information.

Bill Lucia is a Senior Reporter for Government Executive's Route Fifty and is based in Washington, D.C.

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