Court Rules Against DeVos in Loan Forgiveness Case - Higher Education
Higher Education News and Jobs

Court Rules Against DeVos in Loan Forgiveness Case

by

U.S. Education Secretary Betsy DeVos’ move to delay Obama-era protections for students defrauded by for-profit colleges has been dealt a setback by a federal judge who called her actions “arbitrary and capricious,” according to a CBS News report.

In a lawsuit filed by Democratic attorneys general from 19 states and the District of Columbia and former students who challenged the delay, U.S. District Judge Randolph Moss in the District of Columbia ruled Wednesday that DeVos’ actions were unlawful.

Education Secretary Betsy DeVos

The case centered on the borrower defense rule, which allowed defrauded students to have their student loans forgiven. The rule was to have taken effect on July 1, 2017. DeVos had argued those rules created “a muddled process that’s unfair to students and schools.”

But Moss, an Obama appointee, cited inconsistencies in DeVos’ rationale for freezing the rule. He said DeVos acted without conducting a rule-making process on whether to postpone the rules, and he scheduled a hearing Friday to consider next steps.

Department of Education spokeswoman Liz Hill said the agency was reviewing the ruling.

Massachusetts Attorney General Maura Healey, who led the lawsuit, said the ruling was “a victory for every family defrauded by a predatory for-profit school.”

Toby Merrill, a litigator at Harvard University’s Project on Predatory Student Lending, which represents defrauded students, hailed the decision.

After two decades to rapid growth, the for-profit college industry was shaken by the implosion of two major chains of schools that misled students with promises they couldn’t keep and left them with large amounts of debt they couldn’t pay. The Obama administration went hard after the sector, issuing regulations meant to increase student protections and police the schools.

In trying to delay the borrower defense rule, DeVos said the regulations were too broad and allowed for potential abuse on the part of students. She vowed to create a new system that would be more efficient and fair.

But critics dismissed the freezing of this and other regulations as an attempt by DeVos to promote industry interests. They point to the fact that DeVos has hired for-profit industry insiders to top position at her agency.

Rick Hess, director of education policy at the conservative American Enterprise Institute, would not comment on the legal aspects of Wednesday’s ruling, but called it “substantively an unfortunate decision.”

Hess said the Obama regulation “gives blanket forgiveness to students who may or may not have been mistreated or defrauded in any way, it puts taxpayers on the hook for potentially large payouts for people who were not misled and suffered no harm.”

“I think what DeVos is doing is trying to be a responsible steward who is trying to strike a healthier balance between protecting students and ensuring that taxpayers don’t get ripped off.”

Merrill said she hopes the judge will rule that the delayed rules must now take effect. If that happens, she said, students would win some important protections: not having to sign away their right to sue the school, getting loans automatically discharged if their school was closed mid-program and if they were unable to transfer their credits to a similar program, and being eligible for forbearance when applying for loan discharges.

DeVos also put in place a new system of compensating defrauded students for their losses. In a break with the Obama administration’s practice of fully forgiving student loans, DeVos in December rolled out a new tiered relief system, in which students’ loans are forgiven based on their earnings.

That practice was frozen as part of a separate lawsuit. It was uncertain whether the recent court ruling would have any effect on the tiered relief system.

LaMont Jones can be reached at ljones@diverseeducation.com. You can follow him on Twitter @DrLaMontJones.

RELATED ARTICLES >>
Department of Education Launches New App Making it “Easier” to Fill out FAFSA U.S. Secretary of Education Betsy DeVos and Senate Education Committee chairman Lamar Alexander R-Tenn showed Sevier County High School students and local guidance counselors how to use the new myStudentAid mobile app. Secretary Betsy DeVos meets...
New Report Analyzes Impacts of Student Debt on Student Loan Borrowers A new report by the organizations Summer and Student Debt Crisis called “Buried in Debt” investigated the impact of student debt on the daily lives of 7,095 student loan borrowers across the country. Will Sealy The 7,095 students who responded...
Betsy DeVos Appoints new Chief of Staff Betsy DeVos, the U.S. Secretary of Education, announced recently that Nate Bailey, acting Assistant Secretary for Communications and Outreach, has been appointed to Chief of Staff. Nate Bailey “Nate is a well-respected and valued member of our...
Experts: Federal Policy Change Would Harm Transgender Students No one who has been paying attention over the last two years should be surprised to learn that Trump administration officials are completing a policy proposal that would more conservatively define gender under Title IX and have implications for trans...
Semantic Tags: