Betsy DeVos Delays Student
Loan ‘Borrower Defense’ Rule Until At Least 2019
Despite
the pleas — and legal actions — of lawmakers, consumer advocates, and students,
Secretary of Education Betsy DeVos quietly announced Friday that the Department
of Education will further delay, by nearly two years, rules intended to prevent
students at unscrupulous schools from being left with nothing but debt if their
college collapses.
The
Dept. of Education announced — by way of a notice [PDF]
in the Federal Register — that the earliest the Borrower
Defense rule could take effect is July 1, 2019; two years after
the rule was initially supposed to be implemented.
According
to Friday’s notice, the renewed delay was created to “ensure that there is
adequate time to conduct negotiated rulemaking and, as necessary, develop
revised regulations.”
“Given
that the first negotiated rulemaking session is scheduled for Nov. 13-15, 2017,
we cannot complete the negotiated rulemaking process and the development of
revised regulations by Nov. 1, 2018,” the notice states.
The Initial Reset
DeVos
announced a “reset”
of the Borrower Defense rule in July, a month before it was
supposed to take effect.
The
rule — created during the previous administration amid multiple high-profile
for-profit campus closures, and fraud allegations against some of the nation’s
largest for-profit educators — protects students at schools with deceptive
practices.
Under
the revised borrower defense program — unveiled in Oct. 2016 — a student’s
federal education loans can be forgiven if they can prove their college used
deceptive practices to convince them to enroll.
The
rule was also revised so that schools receiving federal aid can no longer put
forced arbitration clauses in their student enrollment agreements. This is
important because these clauses prevent students from suing the school in court
and from joining their complaints together in class actions.
While arbitration is now commonly used in consumer goods and services, in the education field it is almost exclusively used by for-profit schools.
While arbitration is now commonly used in consumer goods and services, in the education field it is almost exclusively used by for-profit schools.
In
announcing her initial delay of the rule, DeVos called for a “regulatory
reset,” claiming the previous rulemaking process “missed an opportunity to get
it right,” resulting in a “muddled process that’s unfair to students and
schools, and puts taxpayers on the hook for significant costs.”
DeVos,
however, didn’t mention that the rule — which has actually been in place for
nearly two decades but seldom used — was overhauled through committee meetings
and other negotiations after a year of discussion.
The
Department had decided to overhaul
the rule in Jan. 2016 following an influx of claims from
students shortly after Corinthian
Colleges Inc — the operator of Heald College, Everest University, and WyoTech –
closed in 2014.
DeVos
also claims that “postsecondary institutions of all types have raised concerns”
about the borrower defense rule. However, only the for-profit industry has sued
to stop this rule.
Giving Forgiveness?
In
Friday’s notice, the Secretary notes that the current version of the Borrower
Defense rules would remain in effect and the Department would continue
processing students’ claims for refunds.
However,
as noted by lawmakers and states
attorneys general, refunds stemming from the Borrower Defense
process have been delayed.
In
July, acting undersecretary of education James Manning told Illinois Sen. Dick
Durbin in a letter [PDF]
that the Dept. of Education had not
approved a loan forgiveness claim in six months.
At
the time, the letter revealed that more than 65,100 borrower defense
applications — 14,949 of which were submitted since Jan. 20 — were currently
pending.
Of
these applications, 45,092 were associated with students who attended defunct
Corinthian College schools and 7,186 belong to those who attended the
also-closed ITT Technical schools.
Many
students who submitted claims for borrower defense have actually been approved.
Despite this, their loans have yet to been discharged, according to lawmakers.
Back
in May, lawmakers claimed that
while the 23,000 students were notified in January that their Borrower Defense
claims had been approved and they would receive discharges and refunds within
60 days and 120 days.
Despite
this, the senators contended that they had received reports that many
previously approved students had not obtained the relief they were promised
within 120 days.
Not Surprised
As
with the previously announced delay, lawmakers and advocates were quick to
criticize the Dept. of Education and DeVos for the new timeline.
Washington
Sen. Patty Murray called the
latest move another attempt by DeVos to “put corporations’ bottoms lines ahead
of students and borrowers’ best interests.”
“Instead
of giving predatory corporations the green light to continue to take advantage
of students, Secretary DeVos needs to stop these outrageous delays and start
providing relief to the tens of thousands of students who have been cheated out
of their education and savings,” Murray said in a statement.
Suzanne
Martindale, staff attorney for our colleagues at Consumers Union, tells
Consumerist that advocates are concerned about the Department’s actions to
delay while student borrowers remain in limbo in the here and now.
“The
Department must do its job and honor the law, even if they delay the 2016 rule
and then implement a new Borrower Defense rule in the future,” Martindale says,
noting that borrowers still have rights under the Higher Education Act to
assert a defense of repayment of their loans.
Previously
lawmakers, advocates, and students raised concern with the Department’s first
delay of the rules.
In
July, two
separate lawsuits were filed against DeVos, accusing her of breaking
federal law — the Administrative Procedure Act — by running roughshod over the
regulatory process when she delayed the Borrower Defense rule.
The
first lawsuit [PDF]
was filed by Public Citizen on behalf of two former students at the New England
Institute of Art (NEIA) who owe a total of more than $80,000 in federal student
loans and interest.
The
second lawsuit [PDF]
was filed by a coalition of 18 states and the District of Columbia. It accuses
DeVos of using the delay as an illegally expedient way of repealing the
Borrower Defense rule without going through the lengthy official process of
doing so.
The
process of repealing a federal regulation is effectively the same as the
process for creating a new rule: proposing the rule, drafting it, seeking
comment, finalizing the text. Even the most expeditious rulemaking takes
several months. Some rules require years to finalize.
A
similar lawsuit was filed
against the Department and DeVos last week with regard to the
delay of the Gainful
Employment rule, also meant to protect students from unscrupulous
colleges.
Prior
to DeVos’ reset of the rules, a group of state attorneys general attempted to take
matters into their own hands.
In
June, eight states and the District of Columbia filed a motion to
intervene [PDF]
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.