Attorney General Becerra Calls on Education Secretary DeVos to Reject Toothless Student Borrower Defense Proposal

SACRAMENTO — California Attorney General Xavier Becerra, leading a coalition of 20 attorneys general, today submitted a letter to the U.S. Department of Education (Department) criticizing proposals that the Department offered during its recent rulemaking sessions to redraft regulations on borrower defense and financial responsibility. Borrower defense is the process by which students who have been defrauded by their schools can have their federal student loans discharged. For example, after the collapse of Corinthian Colleges in 2015, the California Attorney General assisted the Department in developing streamlined procedures to provide critical loan relief to tens of thousands of defrauded students around the country.

In the letter to Education Secretary Betsy DeVos, the Attorneys General underscore that the Department’s recent proposals are a major step backwards. They do nothing to protect students and taxpayers from deceptive practices and fraud. The letter goes on to urge the Department to address the serious concerns of the Attorneys General before publishing any rules for public comment.

“We're calling on the Secretary of Education to do her job and protect students, not fraudulent for-profit colleges,” said Attorney General Becerra. “So far, the Department has drafted borrower defense rules that do little to protect student borrowers. Instead, these rules would allow unscrupulous, for-profit sham colleges to rip off students and often the U.S. taxpayer with little worry about paying a legal penalty. As a Member of Congress, I supported reforms to the student lending system and defended regulations that protect student loan borrowers. As Attorney General, I will do everything in my power to ensure that all who seek a higher education can do so without having to worry about the motives of for-profit schools.”

In the letter, the Attorneys General highlight some of the most glaring issues with the Department’s proposals:

• The Department proposes a “federal standard” applicable to borrower-defense claims that is wholly inadequate and would serve only to limit defrauded students’ access to critical loan relief;
• The Department proposes a borrower-defense process that excludes any role for state attorneys general;
• The Department proposes imposing a three-year statute of limitations on borrower-defense claims. The imposition of any statute of limitations on these claims is patently unfair;
• The Department proposes preserving mandatory arbitration, which suppresses students from bringing meritorious claims and prevents information about the few disputes that are brought from ever coming to light; and
• The Department fails to propose a streamlined process to discharge groups of similar borrower-defense claims.

The Department’s recent rulemaking comes on the heels of its decision to throw out its borrower-defense regulations promulgated in November 2016, which were the result of a rulemaking committee in which the California Attorney General’s Office served as the lead negotiator for state attorneys general. These regulations went a tremendous distance to achieving the Department’s then-stated goal of giving defrauded borrowers access to a consistent, clear, fair, and transparent process to seek debt relief. The Department, however, has unlawfully delayed implementation of these rules and decided to draft new rules from scratch. A coalition of state attorneys general, including California, have sued the Department over this unlawful delay.

Attorney General Becerra has been a leader when it comes to holding the Department and Secretary of Education accountable. Not only has he challenged the Department for unlawfully delaying its 2016 borrower-defense regulations, he has also sued the Department for delaying implementation of its gainful-employment rules—rules that help weed out vocational programs that do not adequately prepare their students for jobs. Most recently, Attorney General Becerra urged Secretary DeVos to expedite loan forgiveness for students defrauded by Corinthian Colleges and then sued over her failure to process these applications. Attorney General Becerra’s lawsuit was subsequently joined by former Corinthian students represented by Housing and Economic Rights Advocates and the Harvard Law School Legal Services Center.  Finally, Attorney General Becerra also announced a settlement with Aequitas Capital Management providing more than $51 million in debt relief for Californians who attended schools owned by Corinthian.

A copy of the letter is attached to the electronic version of this release at oag.ca.gov/news.