Oregon, 22 others sue DeVos, Dept. of Education for repealing ‘borrower defense’ rules

SALEM, Ore. (KTVZ) -- Oregon Attorney General Ellen Rosenblum joined a coalition of 23 state attorneys general in a lawsuit Wednesday against U.S. Secretary of Education Betsy DeVos and the Department of Education, challenging the repeal of 2016 “borrower defense” regulations for students, replaced with ones they claim mainly benefit predatory for-profit schools. 

The state officials said 2016 borrower defense regulations established critical protections for defrauded student borrowers and provided borrowers a way to get relief from their federal student loans, and created deterrents for schools that engage in predatory conduct.

The regulations built on lessons learned from the collapse of Corinthian Colleges – a predatory, for-profit chain of colleges that left tens of thousands of students in need of relief.

Specifically, the 2016 regulations provided borrowers who were misled or defrauded 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. However, under the Trump Administration, the ED repealed the 2016 regulations and replaced them with new regulations that make it virtually impossible for students to obtain financial relief, while rolling back oversight over predatory schools.

“Secretary DeVos, as the head of education for our country, should be looking out for our students—not making it harder for them to obtain recourse when a predatory school closes or goes out of business,” said Rosenblum.

“We have been monitoring closely the disastrous impacts of the rule change on students and, once again, we must pursue legal action to ensure students won’t be left holding the bag on worthless debt,” she added.

Despite the 2016 protections, Secretary DeVos sided with for-profit schools, and 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 Oregon Attorney General Rosenblum, 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 they claim 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, according to Rosenblum.

In Wednesday’s 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 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, Rosenblum 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, Pennsylvania, Rhode Island, Vermont, Virginia, Wisconsin, and the District of Columbia.