Judge Rules Against DeVos in Lawsuit Over Delayed Borrower Defense Rule

By Joelle Fredman, NASFAA Staff Reporter

Secretary of Education Betsy DeVos lost a lawsuit Wednesday brought against her for delaying the effective date of an Obama-era regulation aimed at ensuring that student loan borrowers could apply for and receive debt relief in the case of institutional misrepresentation or closure.

DeVos in June 2017 announced she would halt the implementation of borrower defense regulations, which were set to go into effect the following month, and convene new negotiated rulemaking sessions to rewrite them. ED said at the time that due to a pending lawsuit brought by the California Association of Private Postsecondary Schools (CAPPS), it had the authority to halt the effective date of the regulation under section 705 of the Administrative Procedures Act (APA), which states that when an agency finds "that justice so requires, it may postpone the effective date of action taken by it, pending judicial review.”

The plaintiffs of this case challenging the delay, Bauer and Del Rose, Massachusetts student borrowers who claimed they would benefit from the regulations, as well as a group of 19 states and D.C., filed lawsuits against DeVos shortly after this announcement. They have amended their cases over the past year to include arguments against DeVos for further delaying the effective date of the regulations to July 2018, and then again to July 2019. The court has consolidated their cases.  

Yesterday, Washington District Court Judge Randolph Moss sided with the plaintiffs and ruled that DeVos’ delay of the borrower defense regulations due to the APA was “arbitrary and capricious,” adding that “the Department failed to offer a reasoned basis to stay the implementation of the borrower defense regulations,” among other arguments. 

Moss wrote in the ruling that he would hold a conference to hear from both sides of the case Friday morning before entering his final decision.   

“Because the Department had ample opportunity to respond to Plaintiffs’ arguments, and because this case is, ultimately, about the lawfulness of delay, the court will not delay matters further by setting a schedule for further briefing,” he wrote. “It will, however, schedule a prompt status conference and will permit the parties to present oral argument regarding the appropriate remedies.”

Massachusetts Attorney General Maura Healey wrote on Twitter that the decision “is a victory for every family defrauded by a predatory for-profit school and a total rejection of President Trump and Betsy DeVos’s agenda to cheat students and taxpayers.”

The borrower defense negotiated rulemaking session concluded in February without consensus. Earlier this summer the Department of Education published a Notice of Proposed Rulemaking (NPRM) for the regulations and recently concluded its period of public comment. Final regulations will be published by Nov. 1, 2018, and would be set to take effect July 1, 2019.

 

Publication Date: 9/13/2018


David S | 9/13/2018 11:56:27 AM

Kyle - then what do you propose as a solution? There have been students legitimately defrauded...lots of them. The proposed changes in these regs actually gave incentives to borrowers to default. Not a good strategy. They allow forced arbitration (previous regs disallowed it), which attorneys have explained to me gives complaintants far fewer options and less legal standing. Perhaps there is a workable middle ground, but the revised regs seemed (to me) designed to take away borrowers' recourses.

Kyle R | 9/13/2018 11:3:45 AM

David...Truth is, regardless of how honest you are and how hard you try to minimize your exposure, if a belief exists that monetary gain can be made simply by accusing a school a wrongdoing, some will jump at the chance. Then, your attorney and insurance company will urge you to settle because if you fight it, even if you win, it will cost you more money. Then the door opens for others to make bogus claims in hope for a settlement, over and over again....If you fight and win, you lose because of the overall cost. Try doing business in California. It's enough to make you want to walk away from everything, but we don't because we love helping our students yet the for-profit industry is painted with an overly broad brush as being predatory by a certain side.

David S | 9/13/2018 10:5:18 AM

“Arbitrary...the Department failed to offer a reasoned basis..." Wow, it's almost as though public policy is supposed to be based on being in the public interest somehow. Who knew?

I know that I have colleagues who thought the DTR regulations left schools overexposed. Truth is that if you're being honest to students about your school and its programs, making no promises you can't keep, you can't be liable in a DTR claim. But there are/have been schools who very definitely should be liable, and if those bad players are overprotected by an administration that is not very concerned with consumer protections, not only do already vulnerable students get ripped off, but public trust in, and political support of, Title IV programs erodes. These protections are necessary.

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