18 states & DC sue Dept. of Education over delay of for-profit college loans rule

18 states & DC sue Dept. of Education over delay of for-profit college loans rule
A group of 19 Democratic attorneys general have banded together to sue Education Secretary Betsy DeVos after she delayed the implementation of an Obama-era federal rule designed to protect students from predatory loans offered by for-profit colleges.

Massachusetts is the lead plaintiff in the lawsuit filed in US District Court in Washington, DC Thursday. Attorney General Maura Healey (D-Massachusetts) was joined by 18 other Democratic attorneys general from Hawaii to Virginia, including the District of Columbia.

The lawsuit claims that DeVos, in her role as head of the Department of Education, violated federal rule-making laws in mid-June when she delayed the full implementation of the Borrower Defense to Repayment (BDR) directive, which was “designed to hold abusive postsecondary institutions accountable for their misconduct and to relieve their students from federal loan indebtedness incurred as a result of that misconduct,” court documents said.

It would have prevented for-profit schools from forcing defrauded students seeking to have their loans erased into waiving their right to sue institutions. The Obama administration announced the final version of the rule on November 1, after nearly two years of negotiations during the federal rulemaking process.

The measure was set to go into effect on July 1. However, two weeks before the effective date, DeVos announced a “regulatory reset” on two Obama-era regulations, including the BDR.

The orders were put on indefinite hold while the department set up rulemaking committees that would be tasked with developing “fair, effective and improved regulations.”

"My first priority is to protect students," DeVos said in a statement“Fraud, especially fraud committed by a school, is simply unacceptable. Unfortunately, last year's rulemaking effort missed an opportunity to get it right. The result is a muddled process that's unfair to students and schools, and puts taxpayers on the hook for significant costs. It's time to take a step back and make sure these rules achieve their purpose: helping harmed students. It's time for a regulatory reset.”

The attorneys general accuse DeVos and the department of effectively canceling the accepted rule “without engaging in a public deliberative process,” as required by the Administrative Procedure Act (APA), and thus “operates as an amendment to or rescission of the Rule.”

The department cited pending litigation by for-profit schools in California that would challenge the BDR regulations as the reason for the delay, but the lawsuit argued that “both the language of the Delay Notice and the circumstances of its announcement belie this rationale and make clear that... the pending litigation is a mere pretext for repealing the Rule and replacing it with a new rule that will remove or dilute student rights and protections.”

The case could be bolstered by a federal appeals court ruling in a similar case. On Monday, a three-judge panel of the US Court of Appeals for the DC Circuit ruled 2-1 that the Environmental Protection Agency would be allowed to reconsider a 2016 federal rule that limited methane and smog-forming pollutants emitted by oil and gas wells, but could not delay the date it begins. The EPA had sought to suspend new emissions standards for 90 days.

Consumer groups filed a separate legal challenge Thursday to the delay implementing the regulations. Public Citizen and Harvard Law School’s Project on Predatory Student Lending sued the Department of Education on behalf of two former students who claim they were defrauded by the for-profit New England Institute of Art, owned by the Education Management Company.

The students said that, because of the delay, they are unable to file suit against the school after they signed an agreement to resolve any complaints through arbitration, Politico reported. Such an arrangement would be banned by the BDR rule.

The government, however, argued that the schools in California made “serious and credible charges” that the rule exceeded the department’s authority, violated a federal arbitration law and denied the institutions due process.

“The department cannot simply dismiss these allegations,” Education spokeswoman Liz Hill told the Washington Post.

“With this ideologically driven suit, the state attorneys general are saying to regulate first, and ask the legal questions later ‒ which also seems to be the approach of the prior administration that adopted borrower-defense regulations through a heavily politicized process and failed to account for the interests of all stakeholders,” she added.

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.