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Federal court rules against DeVos in for-profit fraud case

  • Education Secretary Betsy DeVos testifies during hearing on the FY19 budget on Capitol Hill in Washington, June 5, 2018. A federal court has ruled that a decision by DeVos to delay an Obama-era rule meant to protect students swindled by for-profit colleges was “arbitrary and capricious,” dealing a significant blow to the Trump administration’s attempt to ease regulations for the industry. AP PHOTO/Carolyn Kaster



Associated Press
Thursday, September 13, 2018

WASHINGTON — A federal court has ruled that it was “arbitrary and capricious” for Education Secretary Betsy DeVos to delay an Obama-era rule meant to protect students swindled by for-profit colleges. The decision is a significant blow to the Trump administration’s attempt to ease regulations for the industry.

A judge in the nation’s capital ruled on Wednesday in favor of Democratic attorneys general from 19 states and the District of Columbia and former students. They had sued DeVos over her decision last year to postpone the rules finalized under President Barack Obama.

DeVos had argued those rules created “a muddled process that’s unfair to students and schools.”

Judge Randolph Moss said DeVos’ rationale for freezing the regulation contained a “fundamental and unexplained inconsistency.”

Massachusetts Attorney General Maura Healey, who led the lawsuit, said the ruling was “a victory for every family defrauded by a predatory for-profit school.”

Toby Merrill, a litigator at Harvard University’s Project on Predatory Student Lending, which represents defrauded students, hailed the decision as “a huge a rebuke to the department.”

“It’s a really big deal, it’s an incredibly important win for student borrowers and really for anyone who cares about having a government that operates under the rule of law as opposed to as a pawn of industry,” Merrill said.

Department spokeswoman Liz Hill said the agency was reviewing the ruling.

It was not immediately clear what further action the court might take. The judge ordered that both parties appear for a status conference on Friday to “address remedies.”

Merrill said she hopes the judge will rule that the delayed rules must now take effect. If that happens, she said, students would win some important protections: not having to sign away their right to sue the school, getting loans automatically discharged if their school was closed mid-program and if they were unable to transfer their credits to a similar program, and being eligible for forbearance when applying for loan discharge.

DeVos’ practice of granting only partial loan forgiveness to students defrauded by nonprofits was ordered frozen as a separate suit proceeds. It was uncertain whether Wednesday’s court ruling would effect that case, as well.