July 13, 2017

Eighteen States Sue U.S. Department of Education for Failure to Uphold Student Borrower Protections

WASHINGTON, D.C.—Democratic attorneys general from eighteen states and Washington, D.C. have sued the U.S. Department of Education and Secretary Betsy DeVos for failing to honor rules protecting students with federal loans from being defrauded by for-profit colleges, Stacy Cowley reports for the New York Times. The rules were established in October 2016 under the Obama administration and were scheduled to take effect July 1.

The lawsuit is led by Massachusetts attorney general Maura Healy who said in a statement, “since Day 1, Secretary DeVos has sided with for-profit school executives against students and families drowning in unaffordable student loans. Her decision to cancel vital protections for students and taxpayers is a betrayal of her office’s responsibility and a violation of federal law.”

Secretary DeVos has chosen not to implement a requirement for for-profit college to put up financial collateral in case of closure. In 2015, Corinthian College, Inc. filed for bankruptcy leading to more than 15,000 applications for federal loan forgiveness totaling $247 million. The department also delayed implementing a rule that would allow students at for-profit colleges to break arbitration clauses built into their enrollment agreements.

Two student borrowers, Meaghan Bauer and Stephano Del Rose, who claim they were cheated and misled about future employment prospect by the for-profit New England Institute of Art in Brookline, Massachusetts also filed suit against the Department of Education over the delay. The New England Institute of Art, of the Art Institutes chain of for-profit colleges, stopped enrolling new students stopped enrolling students and closed in 2015. That year, its parent company, Education Management Corporation, paid a $95.5 million settlement to the Justice Department over illegal recruiting practices. The students have been unable apply for loan forgiveness because of the arbitration clause.

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