Court Weighs Next Steps in Borrower Defense Lawsuit

Inside Higher Ed

By Andrew Kreighbaum

After ruling that Education Secretary Betsy DeVos unlawfully delayed an Obama administration loan rule designed to protect defrauded student borrowers, a federal district court judge is still weighing what, if any, provisions of the rule should go into effect.

The case is unfolding as the Education Department completes a more restrictive overhaul of the borrower defense regulations that DeVos launched last year. If the department issues the new rule by Nov. 1, it would go into effect in July of next year.

Judge Randolph Moss is considering whether the much more generous Obama rule should take effect in the meantime.

Certain mandatory provisions of the rule, such as automatic “closed school” discharge for borrowers whose institution shut down, would benefit students. Others, such as a ban on arbitration agreements and new financial responsibility requirements, would affect colleges — many of them in the for-profit sector.

In a hearing on the case Friday, attorneys for the Education Department asked the judge for another chance to more adequately justify its delay of the rule. The government and for-profit industry representatives argued sudden implementation of the rule would be disruptive and a logistical nightmare.

But Adam Pulver, an attorney with Public Citizen, argued that federal law requires that the 2016 rule now go into effect. And he said continued delay of the rule means continued harm for borrowers.

Moss in the Friday hearing expressed skepticism that the dropping forced arbitration provisions in particular would be an “earth shattering” change for colleges.