NC among states suing Betsy DeVos over delays to student loan protections

Education Secretary Betsy DeVos testifies on Capitol Hill in Washington in a hearing on the fiscal year 2018 budget. Democratic attorneys general in 18 states and the District of Columbia are suing DeVos over her decision to suspend rules meant to protect students from abuses by for-profit colleges.
Education Secretary Betsy DeVos testifies on Capitol Hill in Washington in a hearing on the fiscal year 2018 budget. Democratic attorneys general in 18 states and the District of Columbia are suing DeVos over her decision to suspend rules meant to protect students from abuses by for-profit colleges. AP

Editor’s Note: Since publication, the N&O has learned that passages from this story were taken in large part or in whole from “Promised college loan forgiveness, borrowers wait and wait” by the Associated Press without attribution. This is a violation of our standards. We apologize to our readers.

N.C. Attorney General Josh Stein says a lawsuit he joined Thursday could help students who attended fraudulent, for-profit colleges ease their federal student-loan debt.

Stein joined other attorneys general from around the country to sue U.S. Education Secretary Betsy DeVos, who froze rules last month that would have forgiven the federal loan debt of students cheated by predatory for-profit colleges.

The attorneys general, all Democrats, from 18 states and the District of Columbia accuse the Trump administration’s education secretary of breaking federal law and giving the questionable schools free rein by rescinding the Borrower Defense rule that was to go into effect on the first of this month. They filed the lawsuit Thursday in federal court in the District of Columbia.

“The delayed rules are deeply troubling,” Stein said in a statement. “Students who borrow money for their education are taking a risk to improve their lives – and they must be protected from those who take advantage of vulnerable student borrowers. Delaying these rules that protect students is irresponsible and reckless.”

The rule was adopted late last year before former President Barack Obama left office and the new Republican administration took over. It was created to protect student borrowers by making it easier for students at colleges found to be fraudulent to have their federal loans forgiven.

“With this ideologically driven suit, the state attorneys general are saying to regulate first, and ask the legal questions later—which also seems to be the approach of the prior administration that adopted borrower-defense regulations through a heavily politicized process and failed to account for the interests of all stakeholders,” Elizabeth Hill, a press secretary for DeVos, said in a statement.

The rule was created after nearly two years of negotiations, following the collapse of Corinthian Colleges, a national for-profit chain which enrolled thousands of North Carolina students, Stein pointed out.

But last month, DeVos said the education department wanted to re-evaluate the rule, calling it a “muddled process that’s unfair to students and schools.” The rollback came after a lawsuit was filed in federal court by an association of for-profit colleges in California seeking to block the rule.

Josh Stein, sworn in as NC attorney general in January, has joined in a lawsuit seeking a lift on the Trump administration’s freeze on student loan protections. Robert Willett N&O file

Stein said the federal education department abandoned the notice and public comment process required under federal law to change such rules. He highlighted some of the protections included in the Obama administration rule.

The rule would have have required schools at risk of closing to put up financial collateral. It also banned mandatory arbitration agreements, which prevented many students from suing schools they believed to have defrauded them.

“For-profit schools receive the vast majority of their revenue from the federal government in the form of federal student loans and grants,” the lawsuit contends. “In 2009, the 15 publicly traded for-profit education companies received 86 percent of their revenues from taxpayer-funded loans.”

The lawsuit contends that for-profit schools disproportionately target African-American women, people out of work and veterans who are eligible for federal money designated for workforce retraining.

Enrollment in for-profit schools has grown significantly in the past two decades, according to the lawsuit. From 2000 to 2010, undergraduate enrollment at degree-granting private for-profit institutions quadrupled, the complaint states.

People paying off student loans can apply to the federal government to forgive their debt. When Obama left office, 16,453 borrowers were waiting for loan cancellations that had already been approved, and more than 64,000 others had filed new applications.

Advocates for student borrowers say the pipeline to loan forgiveness slowed significantly after President Donald Trump took office, whipping up worries that some students may be left in the lurch.

The attorneys general who filed the lawsuit this week are from California, Connecticut, Delaware, Hawaii, Iowa, Illinois, Maryland, Massachusetts, Minnesota, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington, and the District of Columbia.

Some education groups were quick to praise the legal action taken by the attorneys general.

“It is simply wrong that the Department of Education would want to do away with regulations that would protect students,” the National Education Association’s president Lily Eskelsen Garcia said in a statement. “It is no surprise that these regulations have been strongly opposed by for-profit schools, which have saddled students with crushing debts for college degrees. If that weren’t enough of a burden, some of the degrees provided by these for-profit institutions have failed to prepare students with a viable pathway to getting a good job and are often not even worth the paper on which they’re printed.”

Anne Blythe: 919-836-4948, @AnneBlythe1