Education Department’s Delay of Rule Prohibiting Schools From Using Forced Arbitration Clauses in Student Contracts Is Harmful

Public Citizen and the Project on Predatory Student Lending

June 14, 2017

Education Department’s Delay of Rule Prohibiting Schools From Using Forced Arbitration Clauses in Student Contracts Is Harmful

Statements of Experts from Public Citizen and Project on Predatory Student Lending

Note: Today the U.S. Department of Education announced that it plans to partially delay the effective date of a package of rules designed to protect students from predatory colleges and career training programs that receive federal funding. The rules, adopted under the Obama administration, include a prohibition on the use of forced arbitration clauses in many student enrollment contracts. These clauses require students to submit any dispute that might later arise between the students and the institution to binding arbitration, a private process with little right to appeal, instead of a court of law. The rules also provide new and long-needed protections for students asserting defenses against repayment of their federal loans based on fraud or other misconduct by the students’ schools.

Below are reactions from experts at two organizations closely involved in the rule-making:

“With today’s announcement, Secretary Betsy DeVos has put the profit margins of for-profit colleges ahead of the interests of students and their families. The department’s announcement of a delay to these long-anticipated student protections is a craven attempt to avoid the agency’s legal obligations to enforce them. The department’s reliance on ongoing litigation to justify this delay, which will apply to portions of the rule not even challenged in the litigation, is a smokescreen. We are prepared to take all legal action necessary to force the department to comply with its obligations to enforce this rule.”

– Julie Murray, attorney, Public Citizen’s Litigation Group

“Today’s action by the Department of Education is unconscionable and illegal. The department has already permitted hundreds of thousands of defrauded student loan borrowers to suffer for years without the relief to which they are entitled. The only ones who benefit from this delay are the for-profit school lobbyists and others profiting from the industry’s harmful and unlawful use of federal taxpayers’ money. The department should no longer be allowed to further delay relief for students by putting off rules intended to make right a longstanding wrong and to protect taxpayers. We will use all legal means necessary to enforce the rights of student loan borrowers.”

-Toby Merrill, director, Project on Predatory Student Lending

###