The lawsuit, filed in U.S. District Court in Washington, challenges the Department of Education’s action in abruptly rescinding its Borrower Defense Rule, designed to hold higher education institutions accountable for cheating students and taxpayers out of billions of dollars in federal loans. The rule was finalized in November and followed the collapse and bankruptcy of Corinthian Colleges – a for-profit chain that committed multiple violations of state and federal law in advertising, enrolling and financing to students.
“Rolling back student loan protections harms Pennsylvania college students and their families,” Attorney General Shapiro said. “With a rising number of students burdened by college loan debt or in default, this is exactly the wrong time for the Department of Education to abdicate its responsibility to protect students from deceptive practices by these for-profit schools. If Secretary DeVos and her Department won’t protect our college students, I will.”
Pennsylvania has over 200 colleges and universities and trade schools, and approximately 100 other for-profit educational institutions. The average student loan debt for a Pennsylvania college graduate is currently $34,798 – the third-highest average debt in the country.
The regulations at issue provide protections for federal student loan borrowers against abusive practices by schools and colleges, including for-profit companies, and assist in enforcing state consumer protection laws. Additionally, they allow student loan borrowers to have their debt forgiven if they were victims of deceptive practices by their school or college, such as misrepresenting job placement rates at the school or other abusive practices.
Secretary DeVos announced earlier this year the Department was reevaluating the Borrower Defense Rule. DeVos also stated the Department’s intent to delay large portions of the rule without soliciting or receiving any comment from stakeholders or members of the public.
The Department simultaneously announced its decision to issue a new rule to replace the Borrower Defense Rule, citing pending litigation in the case California Association of Private Postsecondary Schools (CAPPS) v. Betsy DeVos. The lawsuit filed today argues that, “the Department’s reference to the pending litigation is a pretext for repealing the Rule and replacing it with a new rule that will remove or dilute student rights and protections.”
On June 14, Attorney General Shapiro and a coalition of Attorneys General filed a motion to intervene in the CAPPS case in order to defend students and taxpayers. CAPPS is a trade association representing many for-profit education institutions.
“These safeguards for students to protect them from abuse by for-profit higher education institutions are being abandoned by the very federal agency that should be enforcing them,” Attorney General Shapiro said. “We’ve filed this lawsuit to protect students in our Commonwealth and country and hold these institutions accountable for deceiving students for their own gain.”
Today’s suit asks the court to declare the Department’s delay unlawful and order the Department to implement the Borrower Defense Rule.
In addition to Attorney General Shapiro, the other attorneys general joining the lawsuit include Massachusetts, California, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maryland, Minnesota, New Mexico, New York, North Carolina, Oregon, Rhode Island, Washington, Vermont, Virginia, and the District of Columbia.