A group of 19 state attorneys general is suing Education Secretary Betsy DeVos for delaying an overhaul of rules to erase the federal student debt of borrowers defrauded by colleges.
âWith no notice, with no opportunity for comment â¦ the DeVos team is trying to cancel this rule,âÂ Massachusetts Attorney GeneralÂ Maura Healey, who is leading the lawsuit, said on a call with reporters Thursday. âIt is important that we take action where we see activity by the federal government, Secretary DeVos and the Department of Education, that is unsustainable, unfair and illegal.â
The complaint, filed in U.S. District Court on Thursday, accuses the Education Department, which did not immediately respond to requests for comment, of violating federal law by halting updates toÂ a regulationÂ known as the borrower defense to repayment. The rule, which dates to the 1990s,Â wipes awayÂ federal loans for students whose colleges used illegal or deceptive tactics to get them to borrow money to attend. The Obama administration revised itÂ last year to simplify the claims process and shift more of the cost of discharging loans onto schools.
Before the changes could take effect July 1, DeVos suspended them last monthÂ andÂ said she would convene a new rulemaking committee to rewrite the borrower defense regulation, reviving a process that took nearly two years to complete. Proponents of the revised rule were livid that DeVos made a unilateral decision without soliciting or receiving input from stakeholders or the public.
The state attorneys case could be bolstered by an appeals court ruling Monday striking down the Environmental Protection Agencyâs suspension of new emission standards on oil and gas wells. The EPA used the same legal reasoning as the Education Department in delaying the regulation, but the court said that while the agency could reconsider the rule, it could not delay the effective date while seeking to rewrite the statute.
DeVosÂ said the delayÂ was necessary as the department fought a federal lawsuit by a group of for-profit colleges in California seeking to block the rules. State attorneys general, including those from Maryland, Virginia and the District, argue in their lawsuit that the case is âa mere pretext for repealing the rule and replacing it with a new rule that will remove or dilute student rights and protections.âÂ Many of those same attorneys were involved in a motion last month to intervene in the California lawsuit to prevent the rules from being blocked.
In a separate but related case, Public Citizen and the Project on Predatory Student Lending also filed suit Thursday against DeVos for blocking the defense rule.Â The consumer groups are suing on behalf of former students of the for-profit New England Institute of Art in Brookline, Mass., who previously filed a motion to intervene in the California lawsuit to block the rule.
In defending the rule delay and rewrite, DeVos said the Obama administration created âa muddled process thatâs unfair to students and schools, and puts taxpayers on the hook for significant costs.â ButÂ consumer advocates and liberal lawmakers contendÂ that the changes achieve exactly the opposite by speeding up loan discharges and having colleges foot more of the bill.
To limit financial risk to taxpayers, the new rulesÂ expand the conditions under which colleges have to get a letter of credit from a bank assuring the availability of at least 10 percent of the total amount of federal financial aid funds it receives. Among the circumstances that would trigger a letter are lawsuits filed by federal agencies, defaults on debt obligations and enforcement action taken by an accreditation agency.
âFor almost two years, we worked with other state AGs, schools, lenders, the department, a variety of stakeholders to come up with a rule that would protect students and ensure that schools and taxpayers would be treated fairly,â Healey said.
TheÂ financial obligation and complexities of the new regulations created consternation among some colleges and universities. In announcing the rule delay, DeVos said she was trying to provide âclear, fair and balanced rules.â
The secretaryÂ said the suspension will have no impact on the tens of thousands of pending claims because the oldÂ regulation remains on the books, but state attorneys general say the existing statute doesnât go far enough to protect students.
The first set of changes that were supposed to take effect this month would have, for instance, limited the ability of schools to require students to sign mandatory arbitration agreement and class action waivers that are commonly used by for-profit colleges to thwart legal action by students.Â That stipulation in the new rules was the basis of the California lawsuit.
âItâs important that students have their day in court,â Healey said. âAll aspects of this rule are important and Iâm concerned about any action to undermine or strip any of whatâs in the borrower rule.â
Few people used the defense until 2014, when the collapse of for-profit giant Corinthian Colleges ushered in a deluge of claims at the Education Department. That forced the agency to fix the system and create a new standard to judge appeals for debt relief.
DeVosâs critics say that by delaying the borrower defense changes, she has handed a victory to for-profit colleges and Republican lawmakers that have fought against the rules for years.Â They say she is showing a clear bias in favor ofÂ for-profit schools with the delay and the decision FridayÂ to haltÂ a component of the gainful employment rule.
That regulation threatens to withhold federal student aid from vocational programs whose graduates consistently end up with more debt thanÂ they can repay.Â Career schoolsÂ had until July 1 to inform students about programs that failed to meet the standard set out by the department, but DeVos extended the deadline by a year.
âBetsy DeVos is bending over backwards to make it easier for fly-by-night schools to cheat students and bury them in mountains of debt,â Sen. Elizabeth Warren (D-Mass.) said in a statement Thursday.Â âSecretary DeVos might not like it, but her job is to serve students â and we will make sure she does.â