A federal judge ruled Wednesday that actions taken by Education Secretary Betsy DeVos to stall protections for defrauded students were illegal.
The Obama-era rule in question allows students who were defrauded by their colleges to receive student loan forgiveness. For-profit colleges, in particular, have been guilty of scamming students into ineffective programs and saddling them with student loan debt and credits that don’t transfer.
The rule would have been in place in July 2017, but last year, the department delayed those regulations until 2019 so that it could implement updates to the rule. DeVos said at the time that under these rules, there is “a muddled process that’s unfair to students and schools.”
U.S. District Court Judge Randolph Moss said DeVos moved forward without a rulemaking process and that these actions were “procedurally invalid” and “arbitrary and capricious,” according to the Associated Press.
Moss wrote in his decision, “When an agency decides to delay the effective date of a rule to save the federal government money or to alleviate confusion or a burden on regulated parties while the agency decides whether to amend or to rescind the rule, its action is ‘designed to implement … policy.'”
In July, the Trump administration put forward its replacement for those regulations, which higher education researchers say would make it more difficult for defrauded students to get relief. Under the new rules, students would have to prove that their college showed “a reckless disregard for the truth” or knowingly misled them, requirements that make it much more challenging for students to put forward a successful claim for borrower defense. Colleges can also appeal the department’s findings.
Borrowers would have to apply individually rather than as a group, which wouldn’t help students consistently defrauded by the same college. Secretary DeVos would also have the ability to determine how much students have been harmed in each case brought to the department, instead of using a formula to evaluate the level of harm done by a college or university. Under the Obama-era rules, students would receive a full loan discharge. Under the Trump administration’s proposed rules, there would only be partial relief.
Higher education experts have criticized some of these changes. In December 2017, Clare McCann, deputy director for federal higher education policy at New America, said it didn’t make sense for the department to use tiers based on the current earnings of peers after passing gainful employment (GE) program. The data collected under that program is used to punish programs where students graduate, but appear unable to repay debt, a regulation DeVos recently proposed to rescind.
McCann told ThinkProgress at the time that earnings won’t necessarily accurately portray the harm to defrauded students.
“It may or not be related to the way in which they were lied to,” McCann said. “The basis of many of the claims that have been approved is that the credits didn’t transfer, so maybe they started over and got a degree at another school. But they were still lied to about whether or not the credits transferred. It has nothing to do with whether or not they are making money.”
That tiered system has been frozen as the result of another lawsuit, according to the Associated Press.
Jennifer Wang, director of The Institute for College Access and Success’ Washington, D.C. office, explained to ThinkProgress in February that the department’s proposal that borrowers must show that their college misled them, could be burdensome for students seeking debt relief.
“Who is going to decide what is reasonable in that case — a Department of Education attorney, who has far more sophistication and resources than the student who has often been tricked into enrolling into a school like this?” Wang told ThinkProgress at the time.
Student debt activists fought hard to get the Obama-era Education Department to let students apply for relief through a little known rule created in the ’90s — borrower defense. The department went through a long process in order to clarify how students should apply for debt relief.
Since DeVos stepped into the role of Education Secretary, she has done everything in her power to roll back student protections, including her proposal to rescind regulations that hold colleges accountable for saddling students with more debt that than they can afford to pay back and keeping standards high for student loan servicers, which often misinform borrowers of federal student loans. The Education Department has also employed a number of for-profit college executives and dismantled a team investigating for-profit colleges.
U.S. District Court Judge Randolph Moss will rule on next steps for the case on Friday, Politico reported. It’s unclear whether the decision will have any affect on the content of the rule.