House Fails to Override President Trump’s Veto of Resolution Blocking New Borrower Defense Regulations

By Owen Daugherty, NASFAA Staff Reporter

The House of Representatives on Friday failed to override President Donald Trump’s veto of a congressional resolution that would have undone Education Secretary Betsy DeVos’ new borrower defense regulations, which many say would make it harder for borrowers to have their student debt forgiven if they were defrauded by their colleges.

The House needed a two-thirds majority vote to override the veto Trump issued in May, which was the first he used on a piece of domestic legislation. The House initially passed the resolution to block DeVos’ rule in January, and the Senate followed suit in March, in a rare bipartisan vote using the Congressional Review Act (CRA), which allows Congress to prevent a federal agency from implementing a rule that has not yet gone into effect. It also prevents the agency from issuing a similar rule without authorization from Congress.

The House’s failed override of the veto, by a vote of 238-173, means the new borrower defense regulations will go into effect, as planned, on July 1. Democrats used their time on the House floor Friday to mount a last-ditch effort to garner enough support, with Rep. Susie Lee (D-Nev.), the bill’s sponsor, speaking to the groups of people the legislation protects.

“Communities of color, minorities, low-income students, and veterans are preyed upon by predatory for-profit schools and [ED] is failing to hold these schools accountable for defrauding these student borrowers,” Lee said.

Had the House mustered the votes to override the veto, it would have also had to achieve a two-thirds majority vote in the Senate — a tough challenge even considering the fact that 10 Senate Republicans voted for the initial resolution.

Following Trump’s veto of the bipartisan resolution, the White House issued a statement praising the new rule from the Department of Education (ED).

“Whereas the last administration promoted a regulatory environment that produced precipitous school closures and stranded students, this new rule puts the needs of students first, extends the window during which they can qualify for loan discharge, and encourages schools to provide students with opportunities to complete their educations and continue their pursuit of economic success,” the Trump administration said in its veto message.

Still, Democrats on Friday said the new rule represents the administration siding against students.

"Instead of standing with students and taxpayers, President Trump stood with corrupt private colleges,” Rep. Katie Porter (D-Calif.) said on the House floor.

DeVos’ attempt to halt the implementation of the Obama-era regulations and rewrite them has been littered with issues — both politically and legally — over the last several years.

After delaying the Obama-era rule in 2017, DeVos convened a negotiated rulemaking committee to rewrite the rules. Because the committee was unable to reach consensus, the department was able to write the regulations on its own, presumably taking into account the discussions had during the negotiated rulemaking sessions, as well as public comment submitted after it published a draft of the rule. 

The final rule, though, creates a much higher burden of proof for student borrowers to show they were defrauded by their institutions. Under the Obama rule, a student needed to show a substantial misrepresentation by the school to receive relief. DeVos’s rule requires borrowers to show they suffered financial harm from their institution's misconduct and that the college knowingly made deceptive or false statements.

Further adding to the complications that have arisen from the legal challenges against the DeVos rule, a federal judge in October 2018 ruled against a group of for-profit institutions that asked for an injunction to block the implementation of the rule, making it immediately effective. As a result, depending on when a student’s loans were disbursed, their borrower defense claim may be processed under one of three different rules.

While the Obama rule was delayed, a backlog of borrower defense claims piled up. ED in April reached a settlement to a lawsuit brought by tens of thousands of defrauded borrowers, agreeing to process the backlog of borrower defense applications. As part of the class action settlement, ED has 18 months to process nearly 170,000 applications that student loan borrowers have submitted.

Prior to Friday’s vote, the House Committee on Education and Labor released a report detailing the history of the borrower defense program under the Trump administration.

The report notes the importance of the Obama borrower defense rules, due to the fact that more than 100 for-profit schools have closed their doors over the past decade, leaving students stuck with debt and few avenues to transfer their credits and complete their degrees. Additionally, some of these schools, most notably Corinthian Colleges and ITT Technical Institute, relied on predatory practices to attract students.

The report alleges that in addition to delaying relief to students who were defrauded by their institutions, ED’s process of rewriting the Obama-era rules delayed borrowers’ claims and made it more difficult for them to seek relief.

“Borrowers’ challenges caused by the Department’s unfair policies have been compounded by ED’s mismanagement of the program,” the report states.

The report suggests several actions both ED and Congress can take to alleviate the issue, saying full relief is due for borrowers defrauded by ITT and Corinthian, and that the application for borrower defense claims needs to be straightforward and help borrowers navigate the complex process — something Democratic lawmakers called for in a letter to ED last month.

“This report makes clear that the Trump administration’s approach to borrower defense has always been to provide as little relief as possible to as few borrowers as possible,” Committee Chairman Rep. Bobby Scott (D-Va.) said in a release. “Borrower defense is a valuable tool to give victims of fraud a second chance at a quality education. Instead of using its authority to make defrauded borrowers whole, the Department delayed and denied relief for hundreds of thousands of people who are still in desperate need of help.”

 

Publication Date: 6/26/2020


Jeff A | 6/29/2020 9:49:15 AM

The revised rule will stand, with common sense and fairness to all in higher education prevailing. The new rule applies basic legal principles that should not be overruled by regulatory processes.

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