September 26, 2017

Betsy DeVos Says Students Defrauded By For-Profit Schools Want "Free Money." We disagree.

Education Secretary Betsy DeVos recently described students burdened by high debt levels from fraudulent schools as being after free money. Nothing could be further from the truth.

In reality, the Education Department is causing irreparable damage to student borrowers who say they were defrauded by a for-profit college that left them in overwhelming debt and holding useless degrees.

Public Citizen and the Project on Predatory Student Lending recently argued in a motion filed in the U.S. District Court for the District of Columbia that the Department of Education’s delay of an Obama-era rule designed to protect students from predatory for-profit colleges was unlawful and should be vacated. This rule, adopted in November 2016, created a more transparent and specific process for federal debt relief to be used by students whose colleges engaged in unlawful conduct including fraud and misrepresentation.

Public Citizen and the Project filed suit against the Department of Education in July on behalf of two student borrowers, Meaghan Bauer and Stephano Del Rose. Both attended the New England Institute of Art in Brookline, Mass., to study digital filmmaking and video production. They say that the school misled them about the quality of its education, industry connections and job prospects, and arranged for unmanageable debt. After attending the NEIA from 2011 to 2014, Bauer found herself working the same job she had before she enrolled, as a line cook in a restaurant.

The Department of Education in June delayed the pending Obama-era regulation known as the Borrower Defense rule, which would have given students protections if they claimed they took out loans to attend fraudulent schools; required schools to disclose when their average students were unable to pay down their debt; and prohibited schools receiving federal funds from using forced arbitration agreements and class-action waivers – preventing students from holding the schools accountable in court either individually or as a group. This spring, however, a trade association representing for-profit schools brought a lawsuit challenging the rule, and the Trump administration seized on the lawsuit as a pretext for delaying the key provisions of the rule.

“Rather than go through the process to revoke or change a rule, the Trump administration tried to take an illegal shortcut,” said Adam Pulver, the Public Citizen attorney representing the students. “Students like Meaghan and Stephano who would have had access to the courts to challenge their crushing loans under the rule are being significantly harmed by its delay.”

“The Trump administration is going out of its way to side with this predatory industry, to the great harm of former students and taxpayers,” said Toby Merrill, director of the Project on Predatory Student Lending of the Legal Services Center of Harvard Law School. “Let’s be clear – any delay is harmful to borrowers, and these new regulations should be implemented immediately.” Also Tuesday, 18 state attorneys general will file a parallel brief in a different case asking the court to decide that the agency acted unlawfully in delaying the rule.

Bauer and Del Rose plan to sue the NEIA, but if they do so now, with the Borrower Defense Rule delayed, they risk being forced into arbitration. If they delay suing the school for too long, however, they risk losing the opportunity because of the statute of limitations.  The Department of Education acted arbitrarily and capriciously in ignoring the harms that delaying the rule will cause students like Bauer and Del Rose, and it exceeded its authority to delay rules pending litigation, the students’ brief states. The brief requests that the court grant judgment in favor of the students in the case and vacate the department’s delay of the rule.