Attorney General Becerra Files Suit Against Secretary DeVos and U.S. Department of Education for Unlawfully Repealing Critical “Borrower Defense” Regulations

SACRAMENTO – California Attorney General Xavier Becerra and Massachusetts Attorney General Maura Healey today led a coalition of 23 attorneys general in a lawsuit against Secretary of Education Betsy DeVos and the U.S. Department of Education (ED) challenging their action to unlawfully repeal and replace the 2016 “borrower defense” regulations. These Obama-era regulations established critical protections for student-borrowers who have been misled or defrauded by predatory schools by providing them an efficient pathway to get relief from their federal student loans, and creating robust deterrents for schools that engage in predatory conduct. Under the Trump Administration, ED repealed the 2016 regulations and replaced them with new regulations that make it nearly impossible for victimized students to obtain financial relief, while rolling back oversight over unscrupulous and predatory schools. In the lawsuit, the coalition argues that ED’s decision to repeal and replace the Obama-era regulations violates the Administrative Procedure Act (APA), and asks the court to require ED to reimplement the Obama-era processes and protections.

“If only college students in America could count on the U.S. Secretary of Education, Betsy DeVos, to fight for them as she has consistently done for the predatory for-profit education industry that has deceived and cheated these very students,” said Attorney General Becerra. “Under her leadership, the U.S. Department of Education has replaced critical borrower protections with a process that makes it virtually impossible for victimized students to get the relief they should qualify for. With today’s lawsuit, we continue to fight for student borrower protections so that all who seek a college degree can do so without being cheated by exploitative for-profit colleges.”

The Higher Education Act requires that the Secretary of Education issue regulations that provide for a meaningful process for students to obtain federal student loan relief if they have been misled or defrauded by their school. This process is known as “borrower defense.” In 2016, the Obama Administration began working on new borrower defense regulations, building on lessons learned from the collapse of Corinthian Colleges – a predatory, for-profit chain of colleges that left tens of thousands of students across the nation in need of relief. The California Department of Justice (CA DOJ) was at the forefront of the Corinthian case, obtaining a $1.1 billion default judgment against Corinthian for targeting low-income, vulnerable students through false advertisements. CA DOJ used these lessons to help shape ED’s 2016 borrower defense regulations, serving as lead negotiator for the states on ED’s 2016 negotiated rulemaking committee.

In November 2016, ED issued its borrower defense regulations that further protected defrauded student borrowers. Specifically, the 2016 regulations provided misled and defrauded borrowers access to a consistent, clear, fair, and transparent process to seek debt relief, and also protected taxpayers by holding schools that engage in misconduct accountable. The regulations also ensured that financially troubled schools provide financial protection to the government to ensure that, if they fail, taxpayers would not be left holding the bag.

Despite these new protections, upon taking office Secretary DeVos demonstrated public hostility to the 2016 borrower defense process and failed to hold predatory schools accountable. Two weeks before the 2016 borrower-defense regulations were set to go into effect in 2017, the Trump Administration unlawfully delayed them. Attorney General Becerra, along with a coalition of 19 attorneys general, successfully sued Secretary DeVos over the illegal delay. In November 2019, after the Secretary’s failed delay attempts, ED issued replacement borrower defense regulations that put the interests of predatory schools ahead of student protections. The 2019 borrower defense regulations created a process seemingly designed to thwart relief for defrauded students and shield predatory schools from being held accountable.

In the lawsuit, filed in the U.S. District Court for the Northern District of California, the coalition argues that ED’s repeal and replacement of the 2016 borrower defense regulations violates the APA because:

• It is arbitrary and capricious. The decision to repeal and replace the 2016 rule was not the product of reasoned decision making as required by the APA. In explaining its rationale for the new regulations, ED rejected prior agency determinations going back decades without explanation, grounded its analysis in fundamental misunderstandings, failed to consider alternatives, and disregarded facts and circumstances; and

• It does not comply with Congress’s requirement that the Secretary implement a meaningful process for borrowers to obtain relief. Instead, it establishes an illusory process that makes it almost impossible for students to qualify for borrower defense relief. ED admits as much by acknowledging that only around 4 percent of borrowers eligible for relief will actually get relief. 

Today’s lawsuit is the latest action taken by Attorney General Becerra to defend the 2016 Rule and seek justice for defrauded Corinthian students. On December 14, 2017, the Attorney General sued Betsy DeVos in federal court for failing to expeditiously grant promised loan relief to tens of thousands of students victimized by Corinthian. On July 6, 2017, he joined a coalition of 19 attorneys general in a successful challenge to ED’s delay of the 2016 Rule. On July 13, 2017, he joined a coalition of 21 state attorneys general in criticizing ED for proposing a new rulemaking process to replace the 2016 Rule. On March 5, 2018, he led a coalition of 20 state attorneys general in submitting a letter to ED opposing the proposals it offered during its rulemaking sessions to redraft regulations on borrower defense. On August 30, 2018, he led a coalition of 21 attorneys general to submit a comment letter sharply rebuking ED’s proposed changes to borrower defense regulations. On August 30, 2019, Attorney General Becerra issued a statement in response to ED’s announcement of its proposal to replace the Borrower Defense Rule.

In filing this lawsuit, Attorney General Becerra is joined by the attorneys general of Massachusetts, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Wisconsin, and the District of Columbia.

A copy of the complaint is available here.