AG Jepsen Joins Coalition Calling on Education Secretary to Reject Weakened Student Borrower Defense Rules
Attorney General George Jepsen has joined with 19 other state attorneys general in urging federal Department of Education Secretary Betsy DeVos to reject proposals that would significantly limit the ability of students who have been victimized by predatory for-profit schools to discharge their student loan debt.
Part of a negotiated rulemaking currently underway to replace the existing Borrower Defense Rule, the proposals come on the heels of the federal Department of Education's decision to throw out student-borrower protection regulations enacted in November 2016 after an extensive negotiated rulemaking process in which the department reviewed over 10,000 comments, including those of students, postsecondary institutions, state government officials and consumer advocates.
Those regulations were scheduled to take effect on July 1, 2017, but were delayed by the department. Attorney General Jepsen is part of a coalition of state attorneys general that has sued the department over the delay.
"The Borrower-Defense Rule was created to help protect victims who were defrauded by for-profit colleges – many of whom are veterans and low-income people who were seeking to better their situation through education and instead received worthless degrees and exorbitant debts," said Attorney General Jepsen. "The proposals currently under consideration by the Department of Education would turn back the clock, abandoning all of the careful work done to protect victims and instead helping predatory institutions keep their ill-gotten profits."
In their letter, the attorneys general noted some of their concerns with the proposals, including:
• A proposed "federal standard" applicable to borrower-defense claims that is inadequate and would limit defrauded students' access to loan relief.
• A borrower-defense process that excludes state attorneys general.
• A three-year statute of limitations on borrower-defense claims.
• Preserving mandatory arbitration of borrower-defense claims.
The federal government provides financial assistance in the form of loans to students pursuing higher education under Title IV of the Higher Education Act of 1965. These programs are designed to provide critical assistance to prospective students and expand access to higher education to students who could not otherwise afford to pursue a degree or certificate. They have become a significant source of revenue for many post-secondary institutions, including for-profit schools.
For-profit schools receive the vast majority of their revenue from the federal government in the form of federal student loans and grants. In 2009, the 15 publicly traded for-profit education companies received 86 percent of their revenues from taxpayer-funded loans. Taxpayers invested $32 billion in for-profit schools in the 2009-10 academic year.
State attorneys general have initiated numerous investigations and enforcement actions against for-profit schools for violations of the states’ consumer protection statutes, alleging deceptive and coercive tactics used in recruitment efforts that typically target low-income and minority students and veterans. Many of these actions have resulted in judgments against the schools.
Assistant Attorneys General John Langmaid and Joseph Chambers, head of the Finance Department, are assisting the Attorney General with this matter.
Please click here to view this letter.
Jaclyn M. Severance