WASHINGTON, D.C. – Attorney General Karl A. Racine today joined a coalition of 23 Attorneys General in a lawsuit against Secretary of Education Betsy DeVos and the U.S. Department of Education (ED) to stop the unlawful repeal of the 2016 “borrower defense” regulations that protect student borrowers. These regulations established critical protections for student borrowers who have been misled or defrauded by predatory schools by providing borrowers an efficient pathway to get relief from their federal student loans, and created robust deterrents for schools that engage in predatory conduct. Under the Trump Administration, ED repealed the 2016 regulations and replaced them with new regulations that make it virtually impossible for victimized students to obtain financial relief, while rolling back oversight over unscrupulous and predatory schools. With District residents owing more than $46,000 in federal student loans on average—and a quarter of these owing more than $80,000—it’s crucial that the federal government not roll back borrower protections. The coalition’s lawsuit asks the court to vacate ED’s new regulations. 

Background
The Higher Education Act requires that the Secretary of Education issue regulations that provide for a meaningful process for students to obtain federal student loan relief where their schools have engaged in misconduct. Consistent with this Congressional mandate, in November 2016, ED issued new borrower defense regulations that offered meaningful protections to defrauded student borrowers. Specifically, the 2016 regulations provided misled and defrauded borrowers access to a consistent, clear, fair, and transparent process to seek debt relief, and also protected taxpayers by holding schools that engage in misconduct accountable. The regulations also ensured that financially troubled schools provide financial protection to the government to ensure that, if they fail, taxpayers would not be left holding the bag.

Despite these new protections, upon taking office Secretary DeVos sided with for-profit schools and demonstrated public hostility to the 2016 borrower defense process. Just two weeks before the 2016 borrower-defense regulations were set to go into effect in 2017, the Trump Administration unlawfully delayed them. A coalition of 20 attorneys general, including AG Racine, successfully sued Secretary DeVos over the illegal delay. In November 2019, after the Secretary’s failed delay attempts, ED issued replacement borrower defense regulations that put the interests of predatory schools ahead of student protections. The 2019 borrower defense regulations created a process designed to thwart relief for defrauded students and shield predatory schools from being held accountable.

In the lawsuit, filed in the U.S. District Court for the Northern District of California, the coalition argues that ED’s repeal and replacement of the 2016 borrower defense regulations violates the Administrative Procedure Act (APA) because:

• It is arbitrary and capricious. The decision to repeal and replace the 2016 rule was not the product of reasoned decision making as required by the APA. In explaining its rationale for the new regulations, ED rejected prior agency determinations going back decades without explanation, grounded its analysis in fundamental misunderstandings, failed to consider alternatives, and disregarded facts and circumstances.
   
• It does not comply with Congress’s requirement that the Secretary implement a meaningful process for borrowers to obtain relief. Instead, it establishes an illusory process that makes it practically impossible for students to qualify for borrower defense relief. ED admits as much by acknowledging that only around 4 percent of borrowers eligible for relief will actually get relief.

In filing this lawsuit, AG Racine joins the Attorneys General of California, Massachusetts, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, and Wisconsin.

A copy of the complaint is available here: https://oag.dc.gov/sites/default/files/2020-07/Borrower-Defense-Complaint.pdf 

Online Student Loan Resources for District Residents
Student borrowers who are struggling with student loans can access free resources about repayment options and how to manage student loan debt at Office of the Attorney General’s Student Loan Resource Page, including tips on how to avoid student loan scams. OAG also recently hosted a webinar with the Student Borrower Protection Center about enrolling in income-driven repayment, getting out of default, and other steps student borrowers can take during the COVID-19 pandemic.