Two Citizens and 19 Attorneys General Sue Betsy DeVos for Enabling For-Profit-College Freedom to Exploit

Arguably the most controversial US secretary of education in the history of the office is being sued by two citizens and 19 attorneys general.

On July 06, 2017, two lawsuits were filed against the US Department of Education (USDOE) and its secretary, Betsy DeVos, challenging DeVos’ rescission regarding the Borrower Defense Rule aimed at protecting postsecondary students from abuses of deceptive, predatory postsecondary institutions.

Both lawsuits were filed with the United States District Court for the District of Columbia, and both petition the Court for declaratory and injunctive relief.

One complaint is filed by two individuals, and the other, by attorneys general of 18 states (MA, CA, CT, DE, HI, IL, IA, MD, MN, NM, NY, NC, OR, PA, RI, VT, VA, and WA) and the District of Columbia.

In this post, for the sake of space, I focus on the latter lawsuit, the one involving the numerous attorneys general (and which I will refer to as the “AG lawsuit”). However, both suits are available for any who wish to read them.

The following text is from the introduction of the AG lawsuit:

This lawsuit challenges the Department’s summary and unlawful rescission of a final agency regulation known as the “Borrower Defense Rule” (the “Rule”) that was designed to hold abusive postsecondary institutions accountable for their misconduct and to relieve their students from federal loan indebtedness incurred as a result of that misconduct.

The Department duly promulgated the Rule on November 1, 2016, after an
extensive negotiated rulemaking process in which the Department reviewed over 10,000 comments, including those of students, postsecondary institutions, state government actors, and consumer advocates. The Department, moreover, allowed affected schools more than half a year to prepare for implementation of the Rule, making it effective on July 1, 2017.

The Rule was designed to ensure “that students who are lied to and mistreated by their school get the relief they are owed, and that schools that harm students are held responsible for their behavior.” Press Release, Department of Education, U.S. Department of Education Announces Final Regulations to Protect Students and Taxpayers from Predatory Institutions (Oct. 28, 2016) (“October 2016 Press Release”) The Rule deters institutions from engaging in predatory behavior and restores the rights of students injured by a school’s misconduct to seek relief in court.

Despite the pendency of the Rule for more than seven months, on June 14, 2017, little more than two weeks before the effective date, the Department issued a short notice purporting to delay the effective date of large portions of the Rule indefinitely (the “Delay Notice”). The Department simultaneously announced its intent to issue a new regulation to replace the Rule. By “delaying” the Rule, the Department effectively canceled a duly promulgated regulation without soliciting, receiving, or responding to any comment from any stakeholder or member of the public, and without engaging in a public deliberative process.

The Delay Notice cites the Administrative Procedure Act (“APA”), 5 U.S.C.§
705, and states that a delay is necessary pending the resolution of litigation challenging the Rule. However, both the language of the Delay Notice and the circumstances of its announcement belie this rationale and make clear that the Department’s reference to the pending litigation is a mere pretext for repealing the Rule and replacing it with a new rule that will remove or dilute student rights and protections.

The Delay Notice operates as an amendment to or rescission of the Rule.

The APA does not permit the Department to delay a duly promulgated regulation in order to work on a replacement, without first satisfying the statute’s substantive standards for a stay of agency action.

The Delay Notice violates the APA in at least the following respects: (1) the Department failed to undertake notice and comment rulemaking prior to issuing the Delay Notice which operates as an amendment to or rescission of the Rule; (2) the Department failed to apply, or even acknowledge, the requisite legal standard for a stay of agency regulations; (3) the Department did not adequately base its justification for delaying the Rule on the pending litigation referenced in the Delay Notice; and (4) the Department failed to offer a reasoned analysis explaining its change of position regarding the Rule. The Delay Notice should therefore be vacated and set aside pursuant to 5 U.S.C. § 706(2).

The factual allegations section of the AG lawsuit details the problems that states have had with for-profit colleges/universities, including various lawsuits on the state level, including the dependence upon federal money that is borrowed by students of “modest financial resources,” and that such schools not only market to lower-income students, but also use pressure tactics to entice these students into situations of questionable academic value likely to lead to profound debt, high unemployment rates, and loan payment default. Thus, many vulnerable students are exploited by for-profit postsecondary schools, no question.

An excerpt:

In order to maintain and increase their revenue from Title IV student loans, some for-profit schools engage in a variety of abusive and deceptive practices. Such practices include coercive and harassing recruitment tactics, deceptive marketing, and misrepresentations about students’ future career prospects, completion rates, and the reputation or accreditation of the school. For-profit recruiters are trained to use aggressive tactics and often create a false sense of urgency to enroll. Some for-profit colleges train and encourage recruiters to identify prospective students in dire financial straits, and then use that fact to pressure the individuals to enroll.

Prospective students may be misled by for-profit schools about their likelihood of finding employment upon completion of their programs. Although most programs at for-profit schools are career or vocational programs, many students are unable to obtain jobs in their career fields after completing their programs.

Additionally, students who are harmed by the misconduct of for-profit schools are often unable to seek a remedy in court. For-profit schools have used mandatory arbitration agreements and class action waivers to avoid negative publicity and to thwart legal actions by students who have been harmed by their schools’ abusive conduct. …

…States have uncovered a wide array of predatory practices employed by abusive for-profit schools. These practices commonly include unfair and harassing recruitment tactics, false and misleading representations to consumers and prospective students designed to induce enrollment in the schools, the recruitment and enrollment of students unable to benefit from the education sought, and the creation, guarantee, and funding of predatory private student loans.

In fact, the Rule was promulgated in large part as a result of state and federal
investigations into for-profit schools, in particular with respect to the misconduct of Corinthian [College], formerly one of the largest educational institutions in the United States with over a hundred thousand students at campuses throughout the country.

State and federal investigations uncovered that Corinthian committed numerous violations of state and federal law in advertising, recruiting, enrolling, and providing financing to students. The judgments against Corinthian of well over a billion dollars, largely for restitution of tuition and fees paid by students injured by Corinthian’s misconduct, were never paid when Corinthian closed its schools and subsequently filed for bankruptcy.

In the wake of such investigations and enforcement actions against for-profit
schools, state attorneys general have attempted to help students affected by institutional misconduct obtain federal student loan forgiveness. …

Recognizing the damaging impact of institutional misconduct on student
borrowers, Congress called on the Secretary of Education to promulgate regulations governing the process by which students could seek loan discharges based on the conduct of their schools.

The AG suit then details the process whereby the Borrower Defense Rule was developed and includes further justification for the Rule. An excerpt:

The Rule affords a legally significant status to enforcement actions and
investigations undertaken by state attorneys general. A successful enforcement action brought against a postsecondary institution by a state attorney general gives rise to a borrower defense to loan repayment. … Additionally, a state agency’s issuance of a civil investigative demand against a school whose conduct resulted in a borrower defense will qualify as notice permitting the Secretary of Education to seek repayment from the school for any amounts forgiven.

By incorporating state enforcement actions and investigations into the
Department’s borrower defense framework, the Rule enhances the effectiveness of state enforcement efforts and the remedies available for violations of state law.

And then comes the suspect timing of the DeVos’ “delay”:

On May 24, 2017, Secretary DeVos announced that the Department was reevaluating the Rule. In her testimony before a congressional subcommittee, Secretary DeVos referred to the Rule and stated “that is something that we are studying carefully and looking at and we will have something further to say on that within the next few weeks.” …

The same day, the California Association of Private Postsecondary Schools (“CAPPS”), a trade organization including mostly for-profit schools, filed a lawsuit challenging the Rule.

On June 2, 2017, CAPPS moved for a preliminary injunction to bar implementation of specific provisions prohibiting participating schools from using mandatory arbitration agreements and class action waivers to block students from bringing private suits in court.

On June 14, 2017, the Department issued the Delay Notice—a final rule delaying the implementation of numerous provisions included in the Rule. Dept. of Educ., Notification of Partial Delay of Effective Dates (June 14, 2017), at 4….
The two-page Delay Notice was formally published in the Federal Register on June 16, 2017. 82 Fed. Reg. 27,621 (June 16, 2017). …

The Delay Notice cursorily states that the Department’s delay of the Rule was
initiated due to the pending CAPPS litigation.

The AG lawsuit continues with causes of action summed n four counts:

Count I: Failure to Adhere to Procedures Required by Law When Promulgating Regulations

Count II: Failure to Employ the Requisite Legal Standard

Count III: Failure to Provide an Adequate Justification

Count IV: Failure to Offer Reasoned Analysis for Rescission of Rule

And, finally, the following Prayer for Relief:

WHEREFORE, the States request that this Court enter judgment in their favor and grant the following relief after trial on the merits:

a. Declare the Delay Notice unlawful;

b. Vacate the Delay Notice;

c. Order that the Borrower Defense Rule be implemented promptly;

d. Award Plaintiffs reasonable costs, including attorneys’ fees; and

e. Grant such other and further relief as the Court deems just and proper.

And so, as is par for the course in corporate ed reform, America once again waits to hear from the court.

As for Betsy DeVos: She would rather put money in the crooked corporate pocket than enforce any sensible legislation regulating corporate greed.

  Betsy DeVos

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Want to read about the history of charter schools and vouchers?

School Choice: The End of Public Education? 

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Schneider is a southern Louisiana native, career teacher, trained researcher, and author of two other books: A Chronicle of Echoes: Who’s Who In the Implosion of American Public Education and Common Core Dilemma: Who Owns Our Schools?.

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