Federal Judge Lifts Freeze on Student Borrower Protections


After attending the New England Institute of Art (NEIA), a for-profit college in Brookline, Massachusetts, Meaghan Bauer owes more than $41,000 to the Department of Education in federal direct loans.

The former digital filmmaking and video production student filed an application for borrower defense provisions on September 30, 2015,  seeking cancellation of her federal loans after learning that many of the representations made by NEIA were untrue, including claims of job placement assistance by the school.

“I did not finish the program and dropped out in 2014 because of the significant expense and poor quality of the program,” she said.

Ms. Bauer is among more than 130,000 borrowers who applied for debt forgiveness after attending for-profit colleges that allegedly cheated them.

“Our understanding is almost all borrower defense applications have not been processed and remain pending,” said Adam Pulver, attorney with the Public Citizen Litigation Group, a watchdog organization.

U.S. Department of Education Secretary Betsy Devos employed Section 705 of the Administrative Procedure Act to freeze indefinitely the start of Obama-era system changes to 1994 Borrower Defense Regulations, which are reportedly beneficial to student borrowers.

“The current administration is trying to protect some of the business interests that are involved in higher education at the expense of students and their learning,” Mr. Pulver told PacerMonitor News.

Ms. Bauer has since sued the U.S. Department of Education and Ms. Devos in District of Columbia district court. On September 17, 2018, Federal Judge Randolph Moss deemed Ms. Devos’ freeze unlawful.

“Although Ms. Bauer has requested that the Department of Education place loans at issue in her borrower defense application in forbearance, to date she has not been able to secure that status,” wrote Public Citizen Litigation Group attorney Julie A. Murray in Ms. Bauer’s complaint filed on July 6, 2017.

The Department of Education through the Department of Justice Office of Public Affairs declined to comment.

“Judge Moss’s ruling is important because it shows that this administration–in particular, the Department of Education–has not been complying with the legal requirements for policy changes and is taking extreme actions to protect business over students,” said Mr. Pulver. “These actions fail to comply with basic principles of administrative law.”

Attorneys general from multiple states, led by the Commonwealth of Massachusetts, also sued, claiming that Ms. Devos’s failure to implement the 2016 changes deprives them of significant legal status to enforce actions and investigations related to consumer protection violations by schools.

“A state agency’s issuance of a civil investigative demand against a school whose conduct resulted in a borrower defense will qualify as notice permitting the Secretary of Education to seek repayment from the school for any amounts forgiven,” their July 6, 2017, complaint said.

Fraud allegations came to light after the collapse of Corinthian Colleges, a for-profit school that allegedly mislead prospective students with inflated job placement and resulted in a 2014 federal suit filed in Illinois Northern District Court.

New features among the 2016 provisions include investigating and determining the entitlement of loan forgiveness for a group of student borrowers as opposed to findings on a one-on-one basis.

“The provisions are designed to disincentivize educational institutions from engaging in the sorts of behavior, programs or policies that would lead a student to file a borrower defense application,” said Mr. Pulver.

But if the California Association of Private Postsecondary Schools (CAPPS) has its way, the 2016 changes to the 1994 rules may never see the light of day.

In a lawsuit filed on May 24, 2017, also in the District Court of the District of Columbia, CAPPS requested a preliminary injunction, alleging that the new features give students carte blanche to cancel debts.

“The increased costs and the dramatically escalated threat of meritless claims and litigation, both before the Department and in court, will be crippling for many schools,” wrote attorneys for CAPPS in their May 24, 2017, complaint.

CAPPS did not respond to requests for comment but, according to court records, CAPPS believes system changes are likely to shutter many vocational schools and leave many non-traditional students with few or no educational options.

“The colleges want immunity from fraud class action lawsuits being brought in court,” said Mr. Pulver. “They prefer arbitration.”

A hearing on CAPPS’s motion for a preliminary injunction is scheduled to take place on October 9, however, even if CAPPS secures interim relief, the Borrower Defense Regulations that were implemented in 1994 remain in effect.

This means the Department of Education retains the authority to review individual applications and determine whether students are entitled to the same relief.

“Students found that the 1994 regulations were not helpful or effective and were not preventing schools from committing this bad conduct which resulted in students needing to file borrower defense applications with the Department of Education,” said Mr. Pulver.

When determinations of relief will occur is unclear because there is no timeline the department is required to follow. In the meantime, some protection is better than none.

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