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Judge strikes down DeVos attempt to weaken rule for scammed student-loan borrowers

(Source: www.marketwatch.com)

The efforts by Betsy DeVos’s Department of Education to stymie an Obama-era rule surrounding for-profit colleges just hit a major roadblock.

A district court judge ruled Wednesday evening that the multiple attempts by the Department to delay the regulation, known as the borrower defense rule, don’t have basis in law. The decision came as part of litigation brought on behalf of borrowers by Public Citizen, a consumer advocacy organization and Harvard Law School’s Project on Predatory Student Lending.

The ruling also addresses similar litigation brought by 19 states attorneys general challenging the Department’s efforts to slow implementation of the rule.

“This is not the first time, but it’s a really, really important time that we’ve gotten the Department’s illegal attempts to deny people their rights struck down,” said Toby Merrill, the director of the Project on Predatory Student Lending.

The ruling is the latest development in a years-long battle over the borrower defense rule, which allows borrowers to have their federal student debt discharged in cases where they’ve been misled by their schools. The Obama administration developed the rule, amid activist pressure in the wake of the 2015 collapse of Corinthian Colleges, a major for-profit college chain.

The regulation has been on the books since the 1990s, but borrowers rarely used it until activists organized students who had attended Corinthian and other for-profit colleges accused of misleading students to file claims under the law. With thousands clamoring for relief, the Obama-era Department started developing a process for borrowers to file claims and for the agency to evaluate them.

That rule, which was supposed to take effect in July 2017, also included a provision that would prohibit colleges from requiring students to waive their right to go to court or bring a class action against a school as condition of enrolling. But Devos’s Department of Education took multiple steps to delay the implementation of the rule.

In his ruling, the judge described those attempts as “arbitrary and capricious” and a based on “unlawful construction of the Higher Education Act,” the statute that governs higher education and student-aid policy.

“All of these attempts to thwart this rule failed,” Merrill said.

Liz Hill, a Department spokeswoman, said the agency is reviewing the ruling. In the past, DeVos defended the delays, saying in a statement that the Obama-era rulemaking effort “missed an opportunity to get it right,” and resulted in a “muddled process that’s unfair to students and schools.” Agency officials also cited litigation filed by a for-profit college trade group challenging the rule in defense of the delays.

In July, the Department proposed its own version of the rule, which curtailed much of the Obama-era provisions. The new version would take effect in July 2019 at the very earliest, but it is likely to face legal challenges.

In the meantime, the judge’s ruling may offer an opportunity for the borrower defense rule developed during the Obama administration to take effect. The parties will meet Friday to determine how to move forward. Merrill said she’s hopeful the judge will decide to put the original version of the regulation into effect immediately. The ruling may also cast doubt on any new borrower defense rule published by the Department, Merrill said.

“It’s going to pull down the whole house of cards,” said Eileen Connor, the director of litigation at the Project on Predatory Student Lending.

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