Democratic attorneys general in more than 20 states, including Michigan Attorney General Dana Nessel, sued Education Secretary Betsy DeVos on Wednesday, July 15, seeking to repeal her overhaul of a student loan forgiveness program.
Congress voted to strike down her policy, which makes it more difficult to get federal student loans erased, but President Donald Trump saved it through a veto.
Led by California and Massachusetts, a coalition of 22 states and the District of Columbia are challenging DeVos’ policy in a federal suit filed in San Francisco. They say DeVos violated federal rules by issuing her policy without justification, and they say her rules fail to create a meaningful process for defrauded students to get their federal loans forgiven.
The suit seeks to have DeVos’ policy repealed and replaced by an earlier rule created under former President Barack Obama.
California Attorney General Xavier Becerra alleges that DeVos rewrote the rule to protect predatory for-profit colleges, adding that her update makes it nearly impossible for cheated students to get their federal loans forgiven.
“They rigged the system against students, flat and simple,” Becerra said in a call with reporters.
The Education Department called the case “another grandstanding, politically driven lawsuit meant to grab a cheap headline.”
“To any objective observer, our borrower defense rule clearly protects students from fraud, ensures they are entitled to financial relief if they suffered harm and holds schools accountable,” department spokeswoman Angela Morabito said in a statement.
The dispute stems from a policy known as borrower defense to repayment, which allows borrowers to get their federal student loans erased if their colleges made false claims to get them to enroll. The Obama administration expanded the policy to forgive loans for thousands of students who attended for-profit colleges that lied about the success of their graduates.
But DeVos suspended the rules in 2017 and issued her own policy last year, arguing that it had become too easy for borrowers to have federal student loans forgiven. Her update set a higher bar for loan relief, requiring students to prove their colleges knowingly misled them and caused personal financial harm, among other changes.
Congress voted to repeal DeVos’ policy through a bipartisan bill approved in March, but Trump vetoed it. House Democrats tried to override the veto in June but failed to gather enough Republican votes. The rule took effect July 1.
The policy has been assailed by Democrats, but it’s supported by Republicans who say it protects taxpayer money, and by the for-profit college industry, which says it was unfairly targeted by the Obama administration.
Career Education Colleges and Universities, an industry lobbying group, defended the rule Wednesday. Steve Gunderson, the group’s president and CEO, said it stops “ideological harassment” lawsuits filed by legal action groups.
“Nobody wants to deny students who are the victims of fraud of getting the appropriate relief they deserve,” Gunderson said. “This rule seeks to provide equal treatment for students and for schools.”
The suit alleges that the Education Department sought to justify its changes using “inaccurate, unsupported and inconsistent claims.” It says, for example, that the department repeatedly cited its own experience in processing loan forgiveness claims, even though it had not yet approved or denied a single claim when the overhaul was issued.
It also argues that the policy creates “arbitrary impediments” for students, including the requirement that they prove not only that they were misled by their schools, but also that their schools did it knowingly.
“A school may misrepresent the job or earnings prospects of its graduates, the likelihood of completing its program, even the vocational licensing requirements of state law — but a borrower cannot assert these misrepresentations as a defense unless he or she can prove that the school did not simply make a mistake,” according to the suit.
DeVos separately changed the policy to provide only partial loan relief to many students. Her update provides full discharges only if students attended programs that produce graduates with average earnings far below those of graduates at similar programs. Other students get portions of their loans erased. The Obama-era rule provided full loan forgiveness only.
Federal law requires the Education Department to implement a meaningful process for defrauded borrowers to get their federal student loans forgiven, but the suit argues that DeVos’ policy fails to do so.
Nessel’s office says it has fought for relief for student borrowers who have been misled by for-profit schools, including ITT Technical Institute, the Art Institute of Michigan and Career Education Corporation.
“At a time when the Department of Education should want to make every effort to ensure student borrowers are protected as they seek an education, my colleagues and I are left with no other choice but to take Betsy DeVos to court,” Nessel said in a statement. “We are calling on the Department of Education to do right by student borrowers who get robbed by for-profit institutions, rather than to make it more difficult for them to seek relief by rolling back the protections already in place. We have seen thousands of Michiganders fall victim to the misconduct of for-profit institutions. That is reason alone to join in this fight.”
In the lawsuit, Nessel joins attorneys general of California, Massachusetts, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Maine, Maryland, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia and Wisconsin.
DeVos has faced repeated legal challenges over the rule, and it has been a frequent source of conflict with Democratic lawmakers who say the Trump administration stopped processing claims while DeVos changed the policy. In April, DeVos agreed to process a backlog of nearly 170,000 claims within 18 months to settle one of several federal lawsuits she faced.
As of May, the Education Department reported it had nearly 128,000 pending applications. Among all completed claims, about 58,000 have been approved, while 54,000 have been rejected.
AP reporter Adam Beam in Sacramento contributed to this report.
WOOD-TV 8 contributed to this report