Attorney General Becerra: Secretary DeVos Puts Predatory For-Profit Schools Ahead of Defrauded Students with Proposed Borrower Defense Regulations

SACRAMENTO — California Attorney General Xavier Becerra today criticized the U.S. Department of Education (Department) and Secretary of Education Betsy DeVos for putting the interests of predatory for-profit schools ahead of the students she is sworn to protect. Attorney General Becerra and Massachusetts Attorney General Maura Healey, leading a coalition of 20 attorneys general, submitted a comment letter sharply rebuking the Department’s proposed changes to its borrower defense regulations. If enacted, these rules would make it more difficult for defrauded students to obtain financial relief, while giving unscrupulous and predatory schools unwarranted protections. 

“Students pursuing higher education shouldn’t have to worry about being victimized by for-profit cons,” said Attorney General Becerra. “The U.S. Department of Education is failing in its mission to foster educational excellence. Secretary DeVos’ proposed rules fly in the face of reason by prioritizing the protection of deceptive predators who use our educational system to scam and cheat students. These for-profit con artists strategically cheat and manipulate the most vulnerable of our college population: from first-generation college enrollees to single parents to military veterans. With these proposed rules, Secretary DeVos is systematically eliminating opportunities and resources for victims seeking help, while giving a helping hand to those who cheated the students.”

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 preparing factual findings about Corinthian's misconduct and developing streamlined procedures to provide critical loan relief to tens of thousands of defrauded students around the country.

In the letter to Secretary DeVos, the Attorneys General underscore that the Department’s proposed regulations would make it almost impossible for students to secure debt relief. 

The attorneys general outline a number of issues with the Department’s proposal, including:

• Imposing new, more stringent burdens on students in order to establish a claim and get relief.
• Excluding state attorneys general from efforts to protect students and disregarding the states’ role in higher education.
• Requiring students to default on their loans before a claim can be submitted.
• Providing an unreasonable and inadequate timetable for borrowers to submit claims.
• Stopping the practice of discharging loans for groups of students who have been similarly defrauded, and instead requiring each student to file individual claims.
• Granting only partial relief to the vast majority of borrowers with successful claims.
• Allowing schools to use mandatory arbitration rather than the courts. Mandatory arbitration will deter students from bringing claims and will prevent critical information about filed claims from ever coming to light.

The Department’s recent rulemaking comes on the heels of its decision to throw out its borrower defense regulations promulgated in November 2016. In those regulations, the California Attorney General’s Office served as the lead negotiator for state attorneys general and helped give defrauded borrowers access to a consistent, clear, fair, and transparent process to seek debt relief. The Department, however, has unlawfully delayed implementation of those 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 in protecting our students and holding the Department of Education and Secretary DeVos 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 is related to a subsequently filed suit brought by former Corinthian students represented by Housing and Economic Rights Advocates and the Harvard Law School Legal Services Center. In 2017, Attorney General Becerra sued Ashford University, another for-profit school, and its parent company Bridgepoint Education for unlawful activity against its students; that lawsuit is pending. Attorney General Becerra has also announced a settlement with Aequitas Capital Management that provided more than $51 million in debt relief for Californians who attended schools owned by Corinthian, and a settlement with Balboa Student Loan Trust providing another $67 million in debt relief for these students.

A copy of the letter can be viewed here.