Eric Schneiderman for Attorney General

With DeVos Unwilling To Defend Rules, States Try To Protect Students Defrauded By For-Profit Colleges

June 16, 2017

As published by Consumerist, on June 14, 2017.

Education Secretary Betsy DeVos has made it clear that she has no intention to defend regulations put in place to protect students at failed for-profit colleges. But a number of states are now attempting to step in to do the job the Department of Education won’t.

Attorneys general for eight states and the District of Columbia have filed a motion to intervene in a federal lawsuit filed by the California Association of Private Postsecondary Schools (CAPPS) — a lobbying organization for the for-profit college industry — which hopes to stop the planned implementation of rules that aim to protect and refund student loan borrowers defrauded by their schools.

The states — New York, California, Massachusetts, Illinois, Iowa, Maryland, Oregon, Pennsylvania, and D.C. — contend that DeVos will not defend the Borrower Defense rule, and that existing parties do not have the best interest of students in mind.

“If CAPPS is successful in its efforts to overturn these regulations, the State Movants’ interests in protecting their students, ensuring the efficacy of their enforcement efforts, and preserving finite state resources will be harmed,” explain the states in a memorandum filed with the court.

The lawsuit, sought a court order to stop the planned July 1 implementation of the rules. However, after today’s announcement from Secy. DeVos, that deadline has been put on hold.

The Department of Education unveiled the massive proposed overhaul of the Borrower Defense rules in June 2016 and finalized the measures in Oct. 2016, aiming to hold schools accountable in a court of law when they screw over students.

The 927-page rule touched on everything from how and when a student should be reimbursed for loans when their school unexpectedly closes to how schools can employ anti-lawsuit arbitration clauses.

CAPPS argued that the rules would likely “shutter many vocational schools without any reasonable justification and will needlessly leave many non-traditional students with few or no educational options.”

The group maintained that it isn’t just looking out for its own members with the lawsuit, instead claiming that many traditional schools are at risk under the proposed regulations.

“The final rule exposes all schools to massive new liability, and likely will be particularly harmful to schools serving low-income and minority students,” the suit stated.

The AGs see it differently, noting that the rules “provide critical protections for federal student loan borrowers against misconduct by abusive schools and colleges,” and create avenues for “student loan borrowers who have been deceived or cheated by their schools to obtain loan forgiveness.”

To that end, the AGs claim in the motion to intervene that DeVos and CAPPS aren’t going to be looking out for students when considering the regulations.

The AGs suggest that DeVos won’t defend the regulations, pointing to recent comments from DeVos to a House of Representatives subcommittee that declared the Department was “studying carefully and looking at” the already finalized federal rule.

“The Secretary’s suggestion that the Department is currently ‘studying’ the already finalized regulation at issue in this case calls into question the Department’s ability to represent the State Movants’ interests in this matter,” the lawsuit states.

Additionally, the AGs motion notes that at a recent status conference on the case, the Education Department attorneys informed the court that the Department was considering a change to the effective date of the regulations.

“Going back to the drawing board on these regulations is exactly what unscrupulous for-profit schools want the Trump Administration to do,” Attorney General Eric Schneiderman said in a statement. “These rules are vital to protecting our students from the type of abuse we’ve seen far too often.”

Today’s motion to intervene was actually filed before Secretary DeVos announced her intention to redo the Borrower Defense rule. When asked by Consumerist to comment on how this “reset” proposal would affect the attempt to intervene in the CAPPS lawsuit, a rep for AG Schneiderman’s office said, “Today’s announcement makes our intervention all the more critical.”

We’ve also reached out to lawyers representing CAPPS in this case to comment on both the states’ motion and Secy. DeVos’s announcement, but have not yet received a response.

The motion to intervene is just the latest in states’ efforts to ensure borrowers harmed by unscrupulous for-profit colleges are protected.

Back in April, the AGs from dozens of states sent letters to former students of defunct for-profit college chain Corinthian Colleges reminding them to apply for federal student loan discharges.

Last month, a number of those same state officials called on DeVos to stop delaying loan forgiveness. The AGs estimated that more than 27,000 students nationwide who had already been approved for loan forgiveness had yet to see their loans discharged.

The delay, as detailed previously by a number of lawmakers, could cause students to rack up additional costs as many are nearing the end of a 12-month forbearance time period on their loans. Once this timeframe is over, the students face restarting monthly payments on debts that should be canceled.

The AGs urged DeVos to speed up the review of applications and work to finalize the discharge of loans for applications that have already been approved.