Education Secretary Betsy DeVos faces another lawsuit for overturning an Obama-era rule 

A group of consumer advocates filed a lawsuit against the Department of Education (ED) for revising an Obama-era rule that was designed to protect students who were defrauded by predatory schools.

The group is challenging the department’s revised rule on borrower defense, calling it “fatally-flawed” and “grounded on the false premise that student borrowers are the bad actors.” 

The lawsuit was filed by the Project on Predatory Lending and Public Citizen Litigation Group on behalf of the New York Legal Assistance Group, in the U.S. District Court for the Southern District of New York. 

“This devastating rule goes above and beyond the department’s other significant efforts to deny defrauded students loan relief,” Project on Predatory Student Lending Director Toby Merrill said in a press release. “It imposes impossible standards for defrauded students seeking to assert their legal rights to loan cancellation, and relies on explanations that defy logic and rest on no evidence. There is no question this rule is illegal and will not stand up in court.”

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U.S. Education Secretary Betsy DeVos speaks at Harvard University's Kennedy School of Government in Cambridge, Massachusetts, U.S., September 28, 2017. REUTERS/Mary Schwalm

Continuing a day of one-on-one meetings with candidates for positions in his cabinet, President-elect Donald Trump met with Betsy DeVos, two polar opposites thought to be in contention for the education portfolio.

(Photo by Andy Katz/Pacific Press/LightRocket via Getty Images)

U.S. Secretary of Education Betsy DeVos, U.S. first lady Melania Trump and Jordan?s Queen Rania speak with students and administrators at the Excel Academy public charter school in Washington, U.S., April 5, 2017. REUTERS/Joshua Roberts
U.S. Secretary of Education Betsy DeVos speaks before U.S. President Donald Trump signed a memorandum "Increasing Access to High-Quality Science, Technology, Engineering and Math (STEM) Education" in the Oval Office of the White House in Washington, U.S., September 25, 2017. REUTERS/Joshua Roberts
WASHINGTON, DC - OCTOBER 30: U.S. Education Secretary Betsy DeVos (L), who was dressed as Ms. Frizzle from 'The Magic Schoolbus' series, and Counselor to the President Kellyanne Conway attend Halloween at the White House on the South Lawn October 30, 2017 in Washington, DC. President Donald Trump and first lady Melania Trump gave cookies away to costumed trick-or-treaters one day before the Halloween holiday. (Photo by Chip Somodevilla/Getty Images)

U.S. President-elect Donald Trump and Vice President-elect Mike Pence stand with Betsy DeVos before their meeting at the main clubhouse at Trump National Golf Club in Bedminster, New Jersey, U.S., November 19, 2016.

(REUTERS/Mike Segar)

Continuing a day of one-on-one meetings with candidates for positions in his cabinet, President-elect Donald Trump and Vice President Mike Pence met with Betsy DeVos, two polar opposites thought to be in contention for the education portfolio.

(Photo by Andy Katz/Pacific Press/LightRocket via Getty Images)

U.S. President Donald Trump (C, background) waits to interrupt Education Secretary Betsy DeVos as she speaks to students at a school choice event at the White House in Washington, U.S. May 3, 2017. REUTERS/Jonathan Ernst

Grant Hill #33 of the Los Angeles Clippers shakes hands with Owner Dick DeVos, Chairman of Amway and his wife Betsy DeVos during the game against the Orlando Magic during the game on February 6, 2013 at Amway Center in Orlando, Florida.

(Photo by Fernando Medina/NBAE via Getty Images)

US President George W. Bush and First Lady Laura Bush wave after they were introduced by the Chair of the Michigan Republican Party Betsy DeVos 30 October 2004 in Grand Rapids, Michigan. Bush is on his final three days of campaigning prior for the election November 02.

(STEPHEN JAFFE/AFP/Getty Images)

Education Secretary Betsy DeVos makes remarks during a major policy address on Title IX enforcement, which in college covers sexual harassment, rape and assault, at George Mason University, in Arlington, Virginia, U.S., September 7, 2017. REUTERS/Mike Theiler
U.S. Secretary of Education Betsy DeVos and U.S. first lady Melania Trump are greeted by a student during a visit the Excel Academy public charter school in Washington, U.S., April 5, 2017. REUTERS/Joshua Roberts
U.S. Secretary of Education Betsy DeVos (C) and Secretary of Health and Human Services (HHS) Tom Price (R) attend a cabinet meeting with President Donald Trump at the White House in Washington, U.S. March 13, 2017. REUTERS/Jonathan Ernst
U.S. President Donald Trump, joined by U.S. Senator Marco Rubio (from L), advisor Jared Kushner and U.S. Education Secretary Betsy DeVos, thanks fourth-grade students Janayah Chatelier (3rd R) and Landon Fritz (R) for the "Happy Birthday Florida" card they gave him as he visits their classroom at Saint Andrew Catholic School in Orlando, Florida, U.S. March 3, 2017. REUTERS/Jonathan Ernst
U.S. President Donald Trump talks to U.S. Secretary of Education Betsy DeVos during a meeting with teachers and parents at the White House in Washington, U.S., February 14, 2017. REUTERS/Kevin Lamarque
U.S. Education Secretary Betsy DeVos (2nd R) and U.S. Senator Marco Rubio (R-FL) (R) arrive with President Donald Trump aboard Air Force One at Orlando International Airport in Orlando, Florida, U.S. March 3, 2017. REUTERS/Jonathan Ernst
CAMBRIDGE, MA - SEPTEMBER 28: U.S. Secretary of Education Betsy DeVos speaks in a forum at Harvard University Kennedy School of Government on Thursday, September 28, 2017. (Photo by Katye Martens Brier for The Washington Post via Getty Images)

U.S. President-elect Donald Trump and Vice President-elect Mike Pence emerge with Betsy DeVos after their meeting at the main clubhouse at Trump National Golf Club in Bedminster, New Jersey, U.S., November 19, 2016.

(REUTERS/Mike Segar)

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‘Arbitrary and capricious’

 

Under existing federal law, borrowers with federal loans are eligible for loan forgiveness if a college or a university has misled them or engaged in other misconduct in violation of certain state laws. The department has faced an onslaught of these claims, in the wake of the for-profit giant Corinthian Colleges shutting down in 2015. 

According to the lawsuit, the department made changes in 2016 to “protect student borrowers and federal taxpayers by strengthening mechanisms for borrowers who were misled, deceived, and defrauded by their schools to obtain relief from federal student loans and disincentivizing schools’ financially risky and misleading practices.” 

But in 2017, the ED under Education Secretary Betsy DeVos delayed implementation of the 2016 rule three times, the lawsuit asserted, and proceeded to ignore it as “current law.” A federal court had then stated that the department’s delaying of that 2016 rule was “unlawful because the delays were procedurally flawed and arbitrary and capricious.”  

But ED later issued a new rule in 2019, which “greatly relaxed the safeguards put in place in 2016, despite mountains of evidence of the harm that unscrupulous schools had caused student borrowers and federal taxpayers,” the lawsuit stated. ED’s new rules were published in September 2019 and are due to come into effect in July 2020.

The department also released a new “methodology” to assess hundreds of thousands of the potential debt relief claims. Experts and lawmakers criticized the new formula used by the department as “bad math” and “mystifying.” Defrauded students called it a “slap in the face.” 

DeVos responded to these comments, stating that there has been a 5,000% increase in borrower defense claim since 2015, and was simply trying to find a way to efficiently process them. She added that the Obama administration had caused the chaos as it had “weaponized” regulations to go after for-profit colleges, and used the law in a “discriminatory fashion.”

But the lawsuit added that the department, with its 2019 rule, “embraced positions and reasoning that run contrary to both logic and the experience of student borrowers, as demonstrated by a wealth of data and comments submitted in opposition to its proposals.” 

WASHINGTON, DC - DECEMBER 12:  U.S. Secretary of Education Betsy DeVos testifies during a hearing before House Education and Labor Committee December 12, 2019 on Capitol Hill in Washington, DC. The committee held a hearing on "Examining the Education Department's Implementation of Borrower Defense."  (Photo by Alex Wong/Getty Images)

Lawsuits and lawmakers battle DeVos on for-profit issue

The new rules on granting defrauded students relief have been a hot-button issue on Capitol Hill. Previously, House Democrats had voted to overturn DeVos’ borrower defense rule in mid-January, hoping to reinstate the Obama-era rules, but had acknowledged then that the action represented more of a message than an order to DeVos.

The revised rule on borrower defense is “so outrageous that I think it cannot go without comment,” House Education and Labor Chairman Bobby Scott told Yahoo Finance in a previous interview.

But this isn’t the only lawsuit she’s facing on the issue: There’s a separate lawsuit from a teachers union over DeVos’ decision to rescind an Obama-era rule that was designed to protect students from for-profits, called gainful employment. 

Yahoo Finance reached out to ED for comment and has not received a response as of publication.

Aarthi is a writer for Yahoo Finance. She can be reached at aarthi@yahoofinance.com. Follow her on Twitter @aarthiswami

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