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Federal Court Rules Department of Education Illegally Stripped Protections from Student Borrowers

Federal Court Rules Department of Education Illegally Stripped Protections from Student Borrowers

Washington, DC – Yesterday, U.S. District Judge Randolph Moss ruled that the U.S. Department of Education acted illegally when it suspended the Obama-era borrower defense rule. That rule created a clear process for misled or defrauded student loan borrowers to get their federal loans discharged and expanded protections for students from predatory colleges.

Judge Moss ruled that “the Department…did not come close to satisfying” the legal requirements to take protections away from misled student loan borrowers. In fact, he ruled that “the Department did little more than pay lip service to the good cause requirement” which the Department partially relied on to suspend the rule. Judge Moss also said that the Department showed “a fundamental and unexplained inconsistency” with their claim that the Department could not ban forced arbitration clauses in enrollment contracts.

In response to yesterday’s ruling, Reid Setzer, Government Affairs Director for Young Invincibles, issued the following statement:

“This ruling shows that Secretary DeVos will do everything in her power, both legally and illegally, to help predatory for-profit colleges at the expense of borrowers. Rather than push through illegal – and immoral – rules that strip protections from borrowers, they should be listening to the people that would be most affected by these changes – misled student loan borrowers. The newly-proposed borrower defense rule needs to be scrapped and the original rule needs to be fully enforced to ensure defrauded students can get the relief they deserve.”

The original borrower defense rule was finalized in late 2016 and was set to take effect in July of 2017. Before it took effect, the Department of Education temporarily suspended the rule, and would eventually suspend it permanently, both of which were found to be illegal by Judge Moss. Since then, the Department has written a new rule that eviscerates borrowers’ rights, which is currently being finalized.