SACRAMENTO – California Attorney General Xavier Becerra today filed a lawsuit in the U.S. District Court for the Northern District of California against the U.S. Department of Education (ED) over its action to repeal existing protections for student loan borrowers under the Gainful Employment Rule, which provides critical safeguards for student borrowers.
In 2014, the Obama Administration issued the Gainful Employment Rule requiring certain higher education programs — including many offered by vocational schools, community colleges, and for-profit colleges — to meet standards that show that their graduates can earn enough to pay back the debt incurred from attending the program. Under the rule, programs that do not meet federal standards cannot offer federal student aid. The Trump Administration, after illegally delaying enforcement of the rule, is now attempting to completely repeal it.
In the lawsuit, Attorney General Becerra argues that ED’s repeal violates the Administrative Procedure Act and asks the court to immediately declare the repeal unlawful, set it aside, and require ED to enforce the 2014 Gainful Employment Rule.
“At a time when our nation is coming together to deal with the deadly coronavirus and an uncertain future, the last thing we need is to learn that our federal Department of Education is threatening to strip our college students of protections against sham, predatory educational institutions,” said Attorney General Becerra. “That’s why we’re fighting to defend the Gainful Employment Rule. We have a $1.7 trillion student loan crisis in this country that must be addressed. With today’s action, we remind the U.S. Department of Education of its responsibility to safeguard students from these predatory institutions.”
According to ED, more than 98 percent of schools not meeting Gainful Employment standards are for-profit colleges. In contrast, every California public college or university program met Gainful Employment standards. For-profit schools often use deceptive marketing practices to recruit individuals such as veterans, women, low-income students, students of color, and first-generation college students. By granting these predatory for-profit schools access to federal student aid, ED makes more students, including vulnerable students, more likely to choose them.
Repealing the 2014 Gainful Employment Rule would hurt California students. Prior to the rule, graduates borrowed considerable amounts to attend schools that did not meet the required standards including debt-to-earning tests and annual loan-repayment rates. As of 2018, more than 56,000 California students who graduated from these programs held $930 million in federal student loan debt. According to ED’s own assessment, this number will only grow with the repeal of the 2014 rule. In addition, the Gainful Employment Rule complements California’s state-based efforts to impose quality control standards on institutions, which include the requirement for schools participating in the state’s Cal Grant program to meet state targets regarding graduation rates and student loan defaults. Repealing the Gainful Employment Rule would mean that California would expend millions of dollars to support students who attend currently ineligible programs.
In the lawsuit, Attorney General Becerra argues that in its haste to repeal the 2014 Gainful Employment Rule, ED disregarded the requirements of the Administrative Procedure Act.
Attorney General Becerra has ardently defended student borrowers and their access to a quality education, and has taken the Trump Administration to task for its failure to uphold its duty to protect them. On October 17, 2017, Attorney General Becerra joined a coalition of 18 attorneys general in filing a lawsuit against the U.S. Department of Education for illegally delaying the implementation of the Obama-era Gainful Employment Rule. Attorney General Becerra also criticized this rule when it was first proposed on August 10, 2018, and submitted a comment letter to ED denouncing the proposal. In December 2017, Attorney General Becerra sued Secretary DeVos over ED’s failure to expeditiously grant promised, full loan relief to tens of thousands of borrowers with pending “borrower defense” claims who were defrauded by the Corinthian Colleges. Additionally in October 2018, and again in August 2019, Attorney General Becerra called on Secretary DeVos and Federal Student Aid Acting Chief Operating Officer Jim Manning to address the 99 percent denial rate for Public Service Loan Forgiveness applications, a program that helps student loan borrowers who aspire to give back to their country or community by working in a public service field. In May 2019, Attorney General Becerra sent a letter urging ED to discharge the student loans of tens of thousands of veterans who were disabled as part of their service, by developing an automatic discharge program. In June 2018, Attorney General Becerra filed a lawsuit against Navient and its subsidiaries for unlawfully misleading student loan borrowers, engaging in illegal collections practices, and steering borrowers to more costly repayment options. In 2017, Attorney General Becerra sued Ashford University, and its parent company, Bridgepoint Education, for illegal marketing and collections activity, among other abuses; that lawsuit is pending in Alameda County Superior Court.
A copy of the complaint can be found here.