A federal judge has rejected a challenge to the Borrower Defense Rule, ordering its immediate implementation for students nationwide, acting on a challenge filed by Virginia Attorney General Mark R. Herring and other state AGs.
Today’s ruling in the case – California Association of Private Postsecondary Schools (CAPPS) v. Betsy DeVos – follows a decision by Judge Randolph Mosslast month in the U.S. District Court in Washington, D.C., calling Secretary DeVos’ plan to dismantle the federal protections for students cheated by predatory, for-profit schools “unlawful,” “arbitrary and capricious” and “procedurally invalid.”
“Upholding the Borrower Defense Rule is an important win in the fight to protect student borrowers from predatory lenders and for-profit schools,” said Herring. “Time and again the Trump Administration’s policies have favored those who would take advantage of student borrowers, but the judge’s decision today sends the message that what they are trying to do is unlawful. While this is a step in the right direction, I will not stop working to hold for-profit schools accountable and protect student borrowers.”
The Borrower Defense Rule implements protection for students immediately, including approximately $381 million in automatic loan discharges for students whose schools closed on or after November 1, 2013 before they could complete their degrees and who did not re-enroll in another school within three years. The Rule also immediately prohibits for-profit schools that take federal funds from forcing students into secret arbitration proceedings.
The Borrower Defense Rule was finalized by the Obama administration in November 2016 after nearly two years of negotiations, following the collapse of Corinthian Colleges, a national for-profit chain, and was set to go into effect on July 1, 2017. In May 2017, Secretary DeVos announced that the Department was reevaluating the Borrower Defense Rule and later announced its intent to delay large portions of the Rule without soliciting, receiving, or responding to any comment from any stakeholder or member of the public, and without engaging in a public deliberative process. The Department simultaneously announced its intent to issue a new regulation to replace the Borrower Defense Rule.
In response, Herring and a coalition of state attorneys general filed a lawsuit in July 2017, alleging that the U.S. Department of Education violated federal law by abruptly rescinding its Borrower Defense Rule which was designed to hold abusive higher education institutions accountable for cheating students and taxpayers out of billions of dollars in federal loans.
Without the protections of the Borrower Defense Rule, many students defrauded by for-profit schools are unable to seek a remedy in court. The Borrower Defense Rule also prohibits schools from enforcing mandatory arbitration agreements and class action waivers, which are commonly used by for-profit schools to thwart legal actions by students who have been harmed by schools’ abusive conduct.