Massachusetts Attorney General Maura Healey announced Wednesday that she intends to sue US Education Secretary Betsy DeVos and the federal agency over the decision to halt student loan borrower protections put in place late in the Obama administration.
As had been expected, the US Department of Education on Wednesday said it would delay implementation of rules that were set to take effect on July 1 that allow borrowers to seek loan forgiveness if their schools had deceived them or committed fraud. The regulations have been opposed by for-profit schools, which have come under greater scrutiny in recent years for saddling students with huge debts for degrees that failed to provide good jobs.
The federal education agency said instead that it would restart the rule-making process and develop new guidelines to protect borrowers from fraud.
“Unfortunately, last year’s rulemaking effort missed an opportunity to get it right,” DeVos said in a statement. “It’s time for a regulatory reset.”
Healey and consumer advocates, however, blasted the decision.
“Once again, President Trump’s Department of Education has sided with for-profit school executives and lobbyists who have defrauded taxpayers of billions of dollars in federal loans,” Healey said. “This is a betrayal of students and families across the country who are drowning in unaffordable debt.”
The regulations allow borrowers who have been deceived by their schools or are attending institutions that state attorneys general have taken enforcement action against to seek loan forgiveness. The education department can also seek payments back from the schools for any loans it was forced to forgive, under these new rules. The rules also prevented schools that rely on federal student loans from using forced arbitration clauses to prevent court claims over fraud.
In recent years, several for-profit schools have shut down after running afoul of consumer protection rules. Nearly 4,500 American Career Institute students in Massachusetts have qualified for federal loan forgiveness of $30 million of debt. Separately, 2,000 Massachusetts students who attended Corinthian Colleges, a for-profit chain that went bankrupt in 2015, also were eligible for loan discharges.
The federal education department is in the midst of processing 16,000 borrower claims for loan forgiveness.
DeVos has said that students promised loan forgiveness will receive it.
Healey and eight other Democratic state attorneys general on Wednesday also took separate legal action to protect these new regulations. Healey and attorneys general from states including California, Iowa, Oregon, Illinois, and New York filed a motion to intervene in a case before the US District Court for the District of Columbia over student loan borrower protections.
The California Association of Private Postsecondary Schools, a trade group, is challenging the rules, arguing that they make it too easy for students to claim fraud so that they can get their loans discharged and that the rules would harm the industry.
Despite the education department’s decision on Wednesday, the case is ongoing and officials with Healey’s office said they they continue to pursue a motion to intervene.Deirdre Fernandes can be reached at email@example.com. Follow her on Twitter @fernandesglobe.