Pennsylvania Attorney General joins effort to implement rule protecting college borrowers

The rollback came after a lawsuit was filed in federal court by an association of for-profit colleges in California seeking to block the rule.

A final version of the rules was announced last fall after almost two years of negotiations. Proponents of the revised rule were livid that DeVos made a unilateral decision without soliciting or receiving input from stakeholders or public.

"Nearly 16,000 borrower defense claims are now being processed", the Education Department said last month.


The Obama-era "borrower defense" rule, which was supposed to take effect Saturday, included a number of protections aimed at providing student loan relief to those misled or cheated by for-profit colleges or educational programs. The state of California won a judgment of more than $1 billion against Corinthian a year ago for misleading students in its advertising. The states say they have pursued "numerous costly and time-intensive investigations and enforcement actions against proprietary and for-profit schools" that violated consumer protection laws.

The suit was filed by the Attorneys General of Pennsylvania, 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. They filed the lawsuit Thursday in federal court in the District of Columbia. The rule prohibits schools that receive federal funds from relying on existing agreements or entering into new contracts with their students that include forced arbitration provisions.

This morning, two separate lawsuits filed against DeVos and the Education Department allege violations of the Administrative Procedure Act, the federal law which dictates the process for creating and revising regulations.


Failure to implement the rule meanwhile "deprives the states of the economic contributions of students harmed by the misconduct of postsecondary institutions", according to the complaint, which also cites the disparate impact to minority residents and low-income families "who are more likely to be subjected to the abuses of for-profit schools". The rules allowed borrowers to seek loan forgiveness if their schools had deceived them or committed fraud.

DeVos announced last month that implementation of the rule would be put on hold, saying it created a muddled process that "put taxpayers on the hook for significant costs".

Obama hustled the rules through the door after hundreds of colleges shut down due to sweeping accusations of defrauding students, which meant thousands of students were left with gargantuan debts. and no degrees to show for them, the Times reports. This is important because these clauses prevent students from suing the school in court and from joining their complaints together in class actions.


In May, DeVos signaled her intent to target the borrower defense rule and subsequently said that its implementation would be delayed. Elizabeth Hill, a spokeswoman for the Education Department, said the suit brought by the attorneys general was "ideologically driven". Taxpayers are picking up most of the tab, to the tune of $16.6 billion over the next ten years.


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