Despite the pleas — and legal actions — of lawmakers, consumer advocates, and students, Secretary of Education Betsy DeVos quietly announced Friday that the Department of Education will further delay, by nearly two years, rules intended to prevent students at unscrupulous schools from being left with nothing but debt if their college collapses.
The Dept. of Education announced — by way of a notice [PDF] in the Federal Register — that the earliest the Borrower Defense rule could take effect is July 1, 2019; two years after the rule was initially supposed to be implemented.
According to Friday’s notice, the renewed delay was created to “ensure that there is adequate time to conduct negotiated rulemaking and, as necessary, develop revised regulations.”
“Given that the first negotiated rulemaking session is scheduled for Nov. 13-15, 2017, we cannot complete the negotiated rulemaking process and the development of revised regulations by Nov. 1, 2018,” the notice states.
As a result, the Dept. says it won’t be able to properly have a rule ready until July 2019.
The Initial Reset
DeVos announced a “reset” of the Borrower Defense rule in July, a month before it was supposed to take effect.
The rule — created during the previous administration amid multiple high-profile for-profit campus closures, and fraud allegations against some of the nation’s largest for-profit educators — protects students at schools with deceptive practices.
Under the revised borrower defense program — unveiled in Oct. 2016 — a student’s federal education loans can be forgiven if they can prove their college used deceptive practices to convince them to enroll.
The rule was also revised so that schools receiving federal aid can no longer put forced arbitration clauses in their student enrollment agreements. This is important because these clauses prevent students from suing the school in court and from joining their complaints together in class actions. While arbitration is now commonly used in consumer goods and services, in the education field it is almost exclusively used by for-profit schools.
In announcing her initial delay of the rule, DeVos called for a “regulatory reset,” claiming the previous rulemaking process “missed an opportunity to get it right,” resulting in a “muddled process that’s unfair to students and schools, and puts taxpayers on the hook for significant costs.”
DeVos, however, didn’t mention that the rule — which has actually been in place for nearly two decades but seldom used — was overhauled through committee meetings and other negotiations after a year of discussion.
The Department had decided to overhaul the rule in Jan. 2016 following an influx of claims from students shortly after Corinthian Colleges Inc — the operator of Heald College, Everest University, and WyoTech – closed in 2014.
DeVos also claims that “postsecondary institutions of all types have raised concerns” about the borrower defense rule. However, only the for-profit industry has sued to stop this rule.
In Friday’s notice, the Secretary notes that the current version of the Borrower Defense rules would remain in effect and the Department would continue processing students’ claims for refunds.
In July, acting undersecretary of education James Manning told Illinois Sen. Dick Durbin in a letter [PDF] that the Dept. of Education had not approved a loan forgiveness claim in six months.
At the time, the letter revealed that more than 65,100 borrower defense applications — 14,949 of which were submitted since Jan. 20 — were currently pending.
Of these applications, 45,092 were associated with students who attended defunct Corinthian College schools and 7,186 belong to those who attended the also-closed ITT Technical schools.
Many students who submitted claims for borrower defense have actually been approved. Despite this, their loans have yet to been discharged, according to lawmakers.
Back in May, lawmakers claimed that while the 23,000 students were notified in January that their Borrower Defense claims had been approved and they would receive discharges and refunds within 60 days and 120 days.
Despite this, the senators contended that they had received reports that many previously approved students had not obtained the relief they were promised within 120 days.
As with the previously announced delay, lawmakers and advocates were quick to criticize the Dept. of Education and DeVos for the new timeline.
Washington Sen. Patty Murray called the latest move another attempt by DeVos to “put corporations’ bottoms lines ahead of students and borrowers’ best interests.”
“Instead of giving predatory corporations the green light to continue to take advantage of students, Secretary DeVos needs to stop these outrageous delays and start providing relief to the tens of thousands of students who have been cheated out of their education and savings,” Murray said in a statement.
Suzanne Martindale, staff attorney for our colleagues at Consumers Union, tells Consumerist that advocates are concerned about the Department’s actions to delay while student borrowers remain in limbo in the here and now.
“The Department must do its job and honor the law, even if they delay the 2016 rule and then implement a new Borrower Defense rule in the future,” Martindale says, noting that borrowers still have rights under the Higher Education Act to assert a defense of repayment of their loans.
Previously lawmakers, advocates, and students raised concern with the Department’s first delay of the rules.
In July, two separate lawsuits were filed against DeVos, accusing her of breaking federal law — the Administrative Procedure Act — by running roughshod over the regulatory process when she delayed the Borrower Defense rule.
The first lawsuit [PDF] was filed by Public Citizen on behalf of two former students at the New England Institute of Art (NEIA) who owe a total of more than $80,000 in federal student loans and interest.
The second lawsuit [PDF] was filed by a coalition of 18 states and the District of Columbia. It accuses DeVos of using the delay as an illegally expedient way of repealing the Borrower Defense rule without going through the lengthy official process of doing so.
The process of repealing a federal regulation is effectively the same as the process for creating a new rule: proposing the rule, drafting it, seeking comment, finalizing the text. Even the most expeditious rulemaking takes several months. Some rules require years to finalize.
Prior to DeVos’ reset of the rules, a group of state attorneys general attempted to take matters into their own hands.
In June, eight states and the District of Columbia filed a motion to intervene [PDF] in a federal lawsuit filed by the California Association of Private Postsecondary Schools (CAPPS) — a lobbying organization for the for-profit college industry — which hopes to stop the planned implementation of rules that aim to protect and refund student loan borrowers defrauded by their schools.
The states — New York, California, Massachusetts, Illinois, Iowa, Maryland, Oregon, Pennsylvania, and D.C. — contend that DeVos will not defend the Borrower Defense rule, and that existing parties do not have the best interest of students in mind.