Betsy DeVos Faces Lawsuit Over Student Loan Protections

WASHINGTON, DC — Student loan debt in the United States has surpassed $1.3 trillion, owed by millions of people across the country, according to the New York Federal Reserve. Around 11 percent of people with outstanding student debt are considered delinquent, meaning they haven't made payments in the last 90 days, triggering late payment fees and higher interest payments. On average, people in their twenties with this debt pay between $200 and $350 a month on student loans.

Under the Obama administration, the Department of Education aimed to ease the burden of crushing student debt — debt that hits hardest those who never graduate. And for many of those working to pay back their loans, they're given the additional challenge of facing down lenders who try to take advantage of their precarious position using deceptive or fraudulent practices to extract even more money from the vulnerable. (For more information on this and other political stories, subscribe to the White House Patch to receive daily newsletters and breaking news alerts.)

The Borrower Defense rule, finalized in the fall of 2016, was set to go into place on July 1, 2017, and would have offered additional protections for people who have been mistreated by lending institutions. But under the Trump administration, July 1 came and went with no relief for borrowers; the student protections have been suspended.

Secretary of Education Betsy DeVos is now facing a lawsuit brought by 19 attorneys general from across the country accusing her of illegally stymieing the Borrower Defense rules.

With the Obama-era rules in place, students would have stronger protections against predatory lenders. For example, students could not be forced to accept arbitration to resolve any disputes with their lenders and would have the ability to take their case to court.

"To protect students from the start, the regulations seek to deter institutions from engaging in predatory behavior or otherwise exposing the government to risk," said then-Under Secretary of Education Ted Mitchell in October when the rules were announced. "And the rule will protect taxpayers by requiring institutions to put up collateral when they're at risk of closure. For students who are injured by an institution's conduct, these regulations provide a clear path to relief with all of their rights intact, and restore their right to sue."

DeVos, however, disapproves of the previous department leadership's work on the policy.

"Last year's rulemaking effort missed an opportunity to get it right," DeVos said in a statement about the rules in June. "The result is a muddled process that's unfair to students and schools, and puts taxpayers on the hook for significant costs. It's time to take a step back and make sure these rules achieve their purpose: helping harmed students."

"With this ideologically driven suit, the state attorneys general are saying to regulate first, and ask the legal questions later—which also seems to be the approach of the prior administration that adopted borrower-defense regulations through a heavily politicized process and failed to account for the interests of all stakeholders," Liz Hill, Education Department press secretary, said in a statement.

She noted that California Association of Private Postsecondary Schools, a lobbying organization private higher education, is already suing the department to stop implementation of the Obama-era rules. According to hill, the group makes "serious and credible charges" the the rules exceed the department's authority.

"The borrower-defense regulations suffer from substantive and procedural flaws that need to be considered before imposing new burdens on regulated parties that will come at a cost to taxpayers of $14.9 billion in the next ten years," Hill said. "That is why the Secretary decided it was time to take a step back and hit pause on these regulations until this case has been decided in court and to make sure these rules achieve their purpose: helping harmed students."

The Department of Education intends to start from scratch and development its own approach to these issues. However, since the first rule-making process took years to complete, many students worry they may not get the relief they need for years. So 18 state attorneys general, along with the attorney general of D.C., are suing DeVos to implement the rules.

“Since day one, Secretary DeVos has sided with for-profit school executives against students and families drowning in unaffordable student loans,” said Attorney General Maura Healey of Massachusetts, one of the states pushing the lawsuit. “Her decision to cancel vital protections for students and taxpayers is a betrayal of her office’s responsibility and a violation of federal law. We call on Secretary DeVos and the U.S. Department of Education to restore these rules immediately.”

The following states, most of which tend to support Democrats, are part of the lawsuit:

• California
• Connecticut
• Delaware
• Hawaii
• Iowa
• Illinois
• Maryland
• Massachusetts
• Minnesota
• New Mexico
• New York
• North Carolina
• Oregon
• Pennsylvania
• Rhode Island
• Vermont
• Virginia
• Washington

Photo by Win McNamee/Getty Images