Attorney General Nessel and 22 other AGs File Suit Against Secretary DeVos and U.S. Department of Education for Repealing Critical Borrower Defense Regulations

Contact: Ryan Jarvi 517-335-7666
Agency: Attorney General

July 16, 2020

LANSING – Michigan Attorney General Dana Nessel has joined 22 other attorneys general in filing a lawsuit against Secretary of Education Betsy DeVos and the U.S. Department of Education (USDE) challenging their action to repeal the 2016 borrower defense regulations and replace them with regulations that appear to benefit predatory for-profit schools at the expense of defrauded students.  

The 2016 borrower defense regulations established critical protections for student borrowers who have been misled or defrauded by predatory schools by providing borrowers an efficient pathway to get relief from their federal student loans, and creating robust deterrents for schools that engage in predatory conduct. Under the Trump administration, USDE repealed the 2016 regulations and replaced them with new ones that make it extremely difficult for victimized students to obtain financial relief, while rolling back critical oversight measures.  

In the lawsuit, filed Wednesday, the coalition argues that USDE’s decision to repeal and replace the Obama-era regulations violates the Administrative Procedure Act (APA), and asks the court to vacate USDE’s new regulations. 

“At a time when the Department of Education should want to make every effort to ensure student borrowers are protected as they seek an education, my colleagues and I are left with no other choice but to take Betsy DeVos to court,” said Nessel. “We are calling on the Department of Education to do right by student borrowers who get robbed by for-profit institutions, rather than to make it more difficult for them to seek relief by rolling back the protections already in place. We have seen thousands of Michiganders fall victim to the misconduct of for-profit institutions. That is reason alone to join in this fight.” 

Investigations and enforcement actions by attorneys general have revealed the misconduct of numerous for-profit schools and helped secure relief for tens of thousands of student borrowers. 

Nessel’s office has fought for and secured relief for student borrowers from failed for-profit schools including ITT Technical InstituteArt Institute of Michigan, and Career Education Corp

The Higher Education Act requires that the Secretary of Education issue regulations that provide for a meaningful process for students to obtain federal student loan relief where their schools have engaged in misconduct. Consistent with this Congressional mandate, in November 2016, USDE issued new borrower defense regulations that offered meaningful protections to defrauded student borrowers. The regulations built on lessons learned from the collapse of Corinthian Colleges – a predatory, for-profit chain of colleges that left tens of thousands of students across the nation in need of relief. Specifically, the 2016 regulations provided misled and defrauded borrowers access to a consistent, clear, fair and transparent process to seek debt relief, and also protected taxpayers by holding schools that engage in misconduct accountable. The regulations also ensured that financially troubled schools provide financial protection to the government to ensure that, if they fail, taxpayers would not be left holding the bag. 

In the lawsuit, filed in the U.S. District Court for the Northern District of California, the coalition argues that USDE’s repeal and replacement of the 2016 borrower defense regulations violates the APA because: 

  • It is arbitrary and capricious. The decision to repeal and replace the 2016 rule was not the product of reasoned decision-making as required by the APA. In explaining its rationale for the new regulations, USDE rejected prior agency determinations going back decades without explanation, grounded its analysis in fundamental misunderstandings, failed to consider alternatives, and disregarded facts and circumstances. 
  • It does not comply with Congress’s requirement that the Secretary implement a meaningful process for borrowers to obtain relief. Instead, it establishes an illusory process that makes it practically impossible for students to qualify for borrower defense relief. USDE admits as much by acknowledging that only around 4 percent of borrowers eligible for relief will actually get relief. 

In filing this lawsuit, Attorney General Nessel joins the attorneys general of California, Massachusetts, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Maine, Maryland, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, and Wisconsin. 

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