July 6, 2017

Public Citizen and Project on Predatory Student Lending Represent Students Suing to Stop Education Department’s Illegal Delay

Delayed Rule Is Necessary to Protect Students and Taxpayers From Predatory Schools

WASHINGTON, D.C. – The U.S. Department of Education broke the law when it announced a delay of a rule designed to protect students defrauded by predatory for-profit colleges and career training programs, attorneys for Public Citizen and the Project on Predatory Student Lending said in a lawsuit (PDF) filed today in the U.S. District Court for the District of Columbia.

The two groups filed the suit on behalf of Meaghan Bauer and Stephano Del Rose, former students of the for-profit New England Institute of Art (NEIA) in Brookline, Mass. The students allege that NEIA, which is owned by Education Management Corporation (EDMC), engaged in unfair and deceptive practices against them and other students that left them with a useless education, few job prospects and significant debt. The students intend to bring suit against the school for its conduct. They also have asserted a federal right to have the Education Department cancel loans that the students obtained to attend the school based on the school’s unlawful conduct.

“Secretary Betsy DeVos has effectively revoked students’ rights under the rule while giving a pass to predatory schools that wield influence with this administration,” said Julie Murray, a Public Citizen attorney representing the plaintiffs. “We are asking the court to order this administration to implement the rule now, as the law requires.”

Bauer and Del Rose had been counting on an Education Department rule finalized by the Obama administration that prohibits schools receiving federal funds from relying on forced arbitration clauses with their students. This Borrower Defense rule would ensure that Bauer and Del Rose have their day in court in a suit against NEIA. The rule also would provide Bauer and Del Rose with new protections and transparency when the Education Department considers their borrower defense applications.

“Delaying the Borrower Defense rule will leave hundreds of thousands of borrowers like Bauer and Del Rose with a right to have their federal loans cancelled but little clarity about how the Education Department must carry out that process,” said Toby Merrill, director of the Project on Predatory Student Lending of the Legal Services Center of Harvard Law School. “Not only does the department want to pull back the process it has committed to, but it also is capitulating to companies that want to keep borrowers from enforcing their rights in court.”

In another lawsuit filed today, a group of state attorneys general also has argued that the Education Department’s delay of the rule is unlawful.

The Borrower Defense rule was finalized in November 2016 and slated to go into effect on July 1. In May, however, a trade group brought suit to challenge portions of the rule. And last month, the Trump administration announced it would delay key parts of the rule until that litigation is over. It also announced that it would begin a new rulemaking to reconsider the rule. Under the terms of the statute that governs the rulemaking, a replacement could not take effect for at least two years.

Read the complaint (PDF).

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