California joined 17 other states and the District of Columbia to challenge the Trump Administration’s decision to put aside procedures that would have helped students defrauded by for-profit universities.
The regulations, which were supposed to go into effect July 1, laid out new procedures for how students of for-profit colleges could have had their education loans forgiven if they were misled or defrauded by their schools. U.S. Secretary of Education Betsy DeVos’s office issued the pause on the regulations last month. They were finalized last November by the Obama administration with support from California.
The legal challenge marks California’s first lawsuit against the Trump administration on education issues, though it has taken issue with the White House’s rules concerning student loans before. The state’s Office of the Attorney General has also issued statements and challenges tied to the administration’s policies on transgender students.
“At the California Department of Justice, we will continue working to ensure that all who seek higher education can do so without worrying that their American Dream will be stolen by unscrupulous purveyors of a sham college education,” said California Attorney General Xavier Becerra, one of 19 Attorneys General filing the suit in a Washington, D.C., federal court. “These regulations should be implemented because they’re good for students and because that’s what the law requires.”
In response, Elizabeth Hill, press secretary at the Education Department, called the lawsuit “ideologically driven.” She said the Obama administration adopted rules seen to benefit borrowers through a “heavily politicized process and failed to account for the interests of all stakeholders.”
Since 2012 numerous legal cases in multiple states, including California, have either been settled with for-profit colleges for misleading practices or the colleges were found to have violated consumer laws.
In 2016 California Attorney General Kamala Harris won a $1.1 billion verdict against the defunct Corinthian Colleges after a San Francisco judge ruled that the for-profit college system published inflated job placement numbers among its graduates, misled students on its financial health and advertised academic programs it didn’t have, among other violations. Today’s multi-state suit said Corinthian never paid that sum. The Corinthian suit then prompted a coalition of Attorneys General, led by California’s Office of the Attorney General, to help draft the borrower defense regulations with the Obama administration.
Corinthian’s closure led to the federal government’s forgiving $247 million for more than 15,000 affected students, according to October 2016 federal data. Students from that college network were fast-tracked to have their loans forgiven.
The new rules would have updated the suite of financial relief available to students by allowing for faster financial relief for student victims, among other developments. Another major update of the rules would have given affected students a clearer path to file lawsuits in court. “Students would actually have access to the court system if they believed their school had defrauded or otherwise wronged them,” said Debbie Cochrane, vice president at the California-based Institute for College Access & Success. She said for-profit colleges typically require their students to go through arbitration if they feel wronged — and prohibit them from joining together in a class-action suit.
The multi-state lawsuit argues that the Education Department wrongly paused the impending regulations in response to a legal challenge of the borrower defense rules filed in May by the California Association of Private Postsecondary Schools, a trade organization representing mostly for-profit schools. The association’s suit argued that the new rules would have made it too easy for students to sue schools and have their loans discharged. In turn, the multi-state lawsuit filed Thursday argues that the department is using the California trade group’s court challenge as a pretext for terminating the borrower defense regulations that were slated for July 1 in order to replace them with weaker ones.
The lawsuit also faults the Education Department for failing to go through a process that asked the public for input on delaying the impending rules. By contrast, the suit notes that the Obama administration read more than 10,000 comments from the public before crafting its regulations — and also gave the for-profit sector more than half a year to prepare for the updated borrower defense rules.
Many Democrats, consumer groups and student advocacy organizations have repeatedly voiced concern that the Education Department is friendly with the for-profit college sector. As evidence they point to the hiring of a lobbyist who represented for-profit colleges and a former compliance officer at for-profit college operator Bridgepoint Education Inc. That college was ordered by a federal agency to refund $23.5 million to students and has been under investigation by the Justice Department, Securities and Exchange Commission, and several Attorneys General, including California’s.
Congressional Democrats and Republicans have been split over how the federal government should regulate for-profit colleges, whose revenues are largely made up of federal grants and student loans. For-profit college students are more likely than other college students to default on their federal loans. Critics say that’s a sign that their educations are not yielding jobs that allow them to pay off their education debt.
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