Bauer v. DeVos

Consumer Justice
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Case Description: 

In November 2016, the Department of Education adopted the Borrower Defense Rule, a regulation that consists of numerous provisions to protect students and the federal investment in postsecondary education. Once effective, the rule will require schools that participate in the Direct Loan Program not to rely on existing agreements or enter into new agreements with their students that include forced arbitration provisions or provisions waiving students’ right to participate in certain class actions. The rule will also provide needed protections to a longstanding right (often referred to as a “borrower defense”), for student loan borrowers to seek cancellation of federal loans when the loans were used to attend a school that engaged in fraud or certain other unlawful conduct. In June 2017, the Department of Education delayed the effective date of key portions of the rule pending resolution of claims in another case brought by a trade group to invalidate the rule. The Department relied on the Administrative Procedure Act (APA), 5 U.S.C. 705.

Public Citizen, along with the Project on Predatory Student Lending Project of the Legal Services Center of Harvard Law School, on behalf of two federal student loan borrowers, brought suit to compel the Department to implement the rule without delay, arguing that the Department’s delay violates the APA.  In September 2017, plaintiffs filed their motion for summary judgment. In late October, the Department issued an “Interim Final Rule,” stating that even if the delay pursuant to section 705 of the APA were struck down, or if the companion case was resolved, the earliest the Borrower Defense Rule could go into effect was July 1, 2018.  The Department claimed this was required by the Higher Education Act’s “master calendar rule.”  We amended our complaint, and in November, filed a renewed motion for summary judgment, arguing that the new Interim Final Rule also was unlawful, both because of its incorrect interpretation of the master calendar rule and because it was issued without notice and comment or negotiated rulemaking.