Led by Massachusetts Attorney General Maura Healey, a coalition of 19 states on Thursday filed a lawsuit against Education Secretary Betsy DeVos and her department over their efforts to prevent the implementation of new federal rules designed to protect students from the predatory practices of for-profit colleges and their allies in the student loan industry.
The rules in question, known as "borrower defense," would make it easier for student to receive debt forgiveness when defrauded by higher education institutions. After years of consideration by the Obama administration the new rules were set to go into effect on July 1, but were put on hold by DeVos.
The idea behind the rule is simple: hold fraudulent schools accountable when they cheat students and taxpayers out of billions in loans.— Maura Healey (@MassAGO) July 6, 2017
"Since day one, Secretary DeVos has sided with for-profit school executives against students and families drowning in unaffordable student loans," Healey said in a statement. "Her decision to cancel vital protections for students and taxpayers is a betrayal of her office’s responsibility and a violation of federal law."
In the wake of the announcement, Sen. Elizabeth Warren (D-Mass.) issued her support of the states' legal challenge, tweeting, "Betsy DeVos might not like it, but her job is to serve students [and] if she won't do it, we will force her to do so." The purpose of the effort, explained Warren is to challenge the "illegal attempt" of Devos "to protect fly-by-night schools that cheat students and bury them in mountains of debt."
While for-profit colleges make up a relatively small fraction of annual student enrollment nationwide, those who attend such schools stand a much a larger chance of racking up burdensome levels of outstanding debt.
As Healy tweeted:
Across the US, students and families are drowning in unaffordable student loan debt while predatory, for-profit schools rake it in. pic.twitter.com/gs9V0BuPnJ— Maura Healey (@MassAGO) July 6, 2017
In her home state on Wednesday, Healing announced that she had secured funding to give refunds to Massachusetts students who had graduated from Devry University, a for-profit institution accused of defrauding students by misleading them about its job placement rates.
In addition to the suit filed by the AGs, a pair of individual students backed by consumer rights groups filed a separate suit in the same federal court on Thursday. According to the New York Times:
The students both attended the New England Institute of Art in Brookline, Mass., a for-profit school that stopped enrolling new students in 2015. Its parent company, Education Management Corporation, agreed that year to pay $95 million to settle a government lawsuit charging the company with making illegal payments to recruiters. [...]
The two student borrowers who sued the Education Department, Meaghan Bauer and Stephano Del Rose, focused in their lawsuit on that arbitration clause. They plan to sue the New England Institute of Art, which they said misled them about its graduates’ job prospects and earnings, but they expect that lawsuit to be thwarted by the contract they signed with the school, which included a clause requiring that disputes be addressed through arbitration.
The new rules would have blocked many schools from enforcing those clauses. Ms. Bauer and Mr. Del Rose said they were waiting for those rules to take effect before filing their lawsuit.
"Secretary Betsy DeVos has effectively revoked students' rights under the rule while giving a pass to predatory schools that wield influence with this administration," said Julie Murray, a Public Citizen attorney representing the student plaintiffs. "We are asking the court to order this administration to implement the rule now, as the law requires."