States Sue Betsy DeVos For Delaying Student Loan Fraud Protections

by Abel Hampton July 8, 2017, 0:21
States Sue Betsy DeVos For Delaying Student Loan Fraud Protections

The Department of Education was also sued by two student borrowers in the same court for delaying the rules. Under the rules, the Department of Education would automatically discharge the loans of borrowers whose school closed and who have not re-enrolled in another school within three years.

President Barack Obama's administration created the Borrower Defense Rule in the wake of revelations that some for-profit colleges enticed students with promises of an education and diplomas that would allow them to get jobs in their chosen fields. The state of California won a judgment of more than $1 billion against Corinthian a year ago for misleading students in its advertising.

The rules are referred to as borrower defense and would protect students that attend colleges deemed to have acted fraudulently.

California, Connecticut, Delaware, Illinois, Iowa, Maryland, Minnesota, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington are the states that joined Hawaii, DC, Massachusetts and Virginia in the attorneys general case.

"Secretary Betsy DeVos has effectively revoked students' rights under the rule while giving a pass to predatory schools that wield influence with this administration", Julie Murray, a Public Citizen attorney representing the plaintiffs, said in a statement.

However both lawsuits argue that DeVos did not claim or make the case that any damage CAPPS would suffer would be irreparable.

"Since day one, Secretary DeVos has sided with for-profit school executives against students and families drowning in unaffordable student loans", Massachusetts Attorney General Maura Healey said in a statement. Since taking the helm at the Education Department earlier this year, DeVos, the daughter-in-law of Amway founder Richard DeVos and a strong proponent of charter schools, has been chipping away at the student protection rules enacted by the Obama administration. They were crafted following the collapse of several major for-profit college companies, which left some student with no degree and high student-debt.

The suit says the department failed to provide notice and opportunity for comment before delaying the rule, and failed to provide an adequate legal justification. "Our investigation, as well as inquiries conducted by Congress, have demonstrated how some of these institutions seek to maximize their access to federal taxpayer dollars by luring in students with misleading promises about the quality of the education they will receive and the prospects for their futures following completion of a program". On June 14, the Department of Education announced its intent to delay large portions of the Borrower Defense Rule, and simultaneously announced its intent to issue a new regulation to replace the Borrower Defense Rule. They also prohibit colleges from requiring students to resolve complaints against their school through arbitration rather than in court.

DeVos, a Republican, has said accelerating the debt cancellation process would put taxpayers on the hook for significant costs, and a delay is needed while current litigation in California over the rules works through the legal system. The Obama administration admitted "that the regulations would cost taxpayers $16.6 billions over the next decade".


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