WASHINGTON, D. C. – Attorney General Karl A. Racine has won a victory in federal court against United States Education Secretary Betsy DeVos after challenging the U.S. Department of Education’s (ED) plan to abandon federal protections for students cheated by predatory, for-profit schools. The U.S. District Court for the District of Columbia ruled Secretary DeVos’ actions illegal and “arbitrary and capricious” and is holding a hearing today to determine remedies.
“This victory is a major blow to Secretary DeVos’ efforts to roll back borrower protections and a big win for student borrowers in the District and across the country,” said Attorney General Racine. “Millions of student loan borrowers, here and nationally, are struggling to manage more than $1.5 trillion in student debt. We’re defending this rule to ensure student borrowers can get debt relief when they are defrauded by predatory schools.”
The Court’s decision is the result of a 18-state lawsuit that AG Racine joined and filed last year. It alleges that ED violated federal law by abruptly rescinding its Borrower Defense Rule, which was designed to hold predatory schools accountable for cheating students and taxpayers out of billions of dollars in federal loans.
Judge Randolph Moss is holding a hearing today to address remedies. The states, led by Massachusetts Attorney General Maura Healey, are asking the court to order ED to implement the Borrower Defense Rule immediately. The Borrower Defense Rule was finalized by the Obama administration in November 2016, after nearly two years of public consideration and following the collapse of Corinthian Colleges, a national for-profit chain. The rule was set to go into effect on July 1, 2017.
In May 2017, Secretary DeVos announced that ED was reevaluating the Borrower Defense Rule and later announced its intent to delay large portions of the rule without even soliciting any comment from stakeholders or members of the public, and without engaging in a public deliberative process. ED simultaneously announced its intent to issue a new regulation to replace the Borrower Defense Rule.
Without the protections of the Borrower Defense Rule, many students defrauded by for-profit schools are unable to seek loan forgiveness. The rule also prohibits schools from enforcing mandatory arbitration agreements and class action waivers, which are commonly used by for-profit schools to thwart legal actions by students who have been harmed by schools’ abusive conduct.
According to federal statistics, more than 40 million Americans owe more than $1.5 trillion in student loans – nearly triple the amount owed just a decade prior. District residents have the highest student debts in the nation, with the average borrower in the District owing more than $46,000 in federal student loans. Approximately one in four student borrowers in the District owe more than $80,000 on their loans, and one in seven are past due on a federal student loan.
A copy of Judge Moss’s decision is available at: https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2017cv1330-87
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.