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Court Ruling Clears the Way for 2016 Borrower Defense Rule To Take Effect

Oct. 16, 2018

Court Ruling Clears the Way for 2016 Borrower Defense Rule To Take Effect

Judge Denies Industry Request to Block the Rule Pending Further Litigation

WASHINGTON, D.C. – Students have succeeded in pushing back against efforts by the U.S. Department of Education and the for-profit college industry to halt the 2016 borrower defense rule—a set of regulations intended to protect student loan borrowers from predatory schools. Today a judge refused to block the rule from taking effect while an industry challenge to it proceeds in court. The rule became effective at noon ET, after more than a year of illegal delays taken by the Department of Education. The agency announced last week that it would not attempt to further delay the rule.

Today’s victory for students is due to efforts by two former students of a for-profit college who are represented by the Project on Predatory Student Lending and Public Citizen. In Bauer v. DeVos, the students brought a lawsuit against the Department of Education to stop its illegal delays of the rule’s implementation. In California Ass’n of Private Postsecondary Schools (CAPPS) v. DeVos, the students became parties to a case in which they are helping defend the rule’s legality from an ongoing industry challenge.

In Bauer, the court ruled last month that the Department of Education’s delays of the 2016 borrower defense rule were illegal. However, Judge Randolph Moss of the United States District Court for the District of Columbia did not order the borrower defense rule’s immediate implementation. Instead, he indicated that the court might first decide CAPPS’ motion in the related lawsuit for a preliminary injunction to delay the rule yet again. Today’s order rejected CAPPS’s motion, thereby allowing the rule to take effect today.

“It’s extremely validating to see a court agree that what the Department did was wrong, and to know that students who were cheated will finally be able to seek relief,” said Meaghan Bauer, one of the students involved in the litigation. “I hope these rulings remind the Department of Education of its obligation to care for its citizens who are the future of this country and that it will start to act in the interest of students instead of focusing on lining the pockets of for-profit institutions.”

“Today’s decision is a huge win for defrauded borrowers around the country,” said Julie Murray, a Public Citizen attorney representing the students. “The rule is finally in effect. No more excuses. No more delays. Industry will continue to challenge the rule in court, but we will work as long as it takes to defeat those corporate interests and an administration beholden to them.”

“This is a major victory for students across this country in the ongoing battle against the Department of Education and the for-profit college industry,” said Toby Merrill, director of the Project on Predatory Student Lending which represented the students. “Students did not stop fighting to get this rule implemented, and now because of their work these important and long-delayed protections will immediately go into effect.”

“The Bauer case was yet another example of the administration’s attempts to evade legal requirements in pursuit of a deregulatory agenda, to the detriment of students and consumers,” said Adam Pulver, a Public Citizen attorney who represented the borrowers in the Bauer case. “We are pleased that the court correctly found that the Department of Education’s repeated delays were incompatible with the rule of law.”

“The Department had no legal right to delay the rule in the first place, and now they have no choice but to cede the fight and implement the 2016 borrower defense rule as they should have done a long time ago,” said Eileen Connor, director of litigation at the Project on Predatory Student Lending.

The 2016 rule includes important protections for students and taxpayers. The rule:
• Prohibits schools receiving federal funds from relying on forced arbitration clauses;
• Prohibits schools receiving federal funds from banning class-action lawsuits;
• Lays out a clear process for students from schools found to have committed fraud to have their loans discharged; and
• Requires automatic discharge of loans for students who cannot complete their education because their school shuts down.

About the Project on Predatory Student Lending
Established in 2012, the Project on Predatory Student Lending represents former students of predatory for-profit colleges. Its mission is to litigate to make it legally and financially impossible for federally-funded predatory schools to cheat students. The Project has brought a wide variety of cases on behalf of former students of for-profit colleges. It has sued the federal Department of Education for its failures to meet its legal obligation to police this industry and stop the perpetration and collection of fraudulent student loan debt.

About Public Citizen
Public Citizen is a nonprofit consumer advocacy organization that champions the public interest in the halls of power. It defends democracy, resists corporate power and works to ensure that government works for the people – not for big corporations.