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 had successfully established a claim through the borrower defense process under which the vast majority of student borrowers received only partial or no relief from their federal student loan debt. The rule determined 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 did 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 applied an inappropriate statistical formula to the earnings data, denying borrowers full relief unless the median earnings of graduates of the program that they attended were 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, represented borrowers in a challenge to the rule. Our complaint alleged that the rule was arbitrary and capricious because it ignored factors relevant to determining how much a borrower was harmed by a school’s wrongful acts or omissions, rested on an earnings comparison that captured neither that harm nor the value of the education provided, ignored regulatory requirements, and applied an incorrect statistical test to unrepresentative and flawed data. The complaint also alleged 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 had 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. We then moved for summary judgment.
In March 2021, the Department of Education announced that it was rescinding the rule and would be providing full relief to borrowers with previously approved borrower defense claims. The case was then stayed while the Department notified borrowers of their discharges. On November 19, 2021, after the Department confirmed that it had notified all borrowers who had previously received determinations under the rule that they were eligible for full relief, we dismissed the case.