Under the Higher Education Act, student loan borrowers who can show that the school they attended engaged in certain wrongful acts or omissions have a defense against repayment of their federal student loan debt through a process known as “borrower defense” to repayment. The borrower defense process is particularly important in light of revelations that some for-profit colleges and universities have misled and deceived vulnerable students, persuading, sometimes coercing, them to take out federal student loans to attend programs that provided minimal educational value.
In December 2019, the Department of Education adopted a rule for determining the amount of relief to afford student borrowers who have successfully established a claim through the borrower defense process under which the vast majority of student borrowers receive only partial or no relief from their federal student loan debt. The rule determines relief solely by comparing the median earnings of recent graduates of the program that the borrower attended—regardless of whether the borrower graduated or when the borrower attended the program—against the median earnings of recent graduates in programs classified by the Department as similar to that program. The rule does not consider factors such as the cost of the program or the reasonable expectations of the borrower based on the school’s misrepresentations. The rule applies an inappropriate statistical formula to the earnings data, denying borrowers full relief unless the median earnings of graduates of the program that they attended are at least two standard deviations below the median earnings of comparison programs.
Public Citizen, co-counseling with the Project on Predatory Student Lending at Harvard Law School, represents borrowers in a challenge to the rule. Our complaint alleges that the rule is arbitrary and capricious because it ignores factors relevant to determining how much a borrower was harmed by a school’s wrongful acts or omissions, rests on an earnings comparison that captures neither that harm nor the value of the education provided, ignores regulatory requirements, and applies an incorrect statistical test to unrepresentative and flawed data. The complaint also alleges that the rule was adopted without procedures required by law.
On September 16, 2020, we moved to certify the case as a class action on behalf of borrowers who have received determinations under the rule that provide them with less than full relief from their federal student loans. On September 22, 2020, the Court granted our motion for class certification.