AG Ellison sues Secretary DeVos to protect Minnesota students, taxpayers from fraud, deception, and abuse

July 15, 2020 (SAINT PAUL) — Minnesota Attorney General Keith Ellison today joined a coalition of 23 attorneys general in a lawsuit against Secretary of Education Betsy DeVos and the U.S. Department of Education, challenging their actions to unlawfully repeal the 2016 “borrower defense” regulations and replace them with regulations that do nothing more than benefit predatory for-profit schools at the expense of defrauded students.

The lawsuit is the second that Attorney General Ellison filed in the last three weeks to challenge rules that Secretary DeVos improperly put in place to roll back protections for students and taxpayers from fraud, deception, and abuse. In late June, Attorney General Ellison joined a coalition of 16 attorneys general in suing to block DeVos from repealing a rule that blocks taxpayers from subsidizing for-profit schools that sell worthless degrees.

“It’s hard enough to afford your life. No small part of the reason for that is that for three and a half years, Secretary DeVos and the Trump Administration have consistently and illegally put profits and fraud ahead of people and families,” Attorney General Ellison said. “Today once again, they’re going out of their way and outside the law to protect for-profit schools that deceive and defraud students. It’s my job to protect Minnesotans when the Trump Administration abandons them, and the Minnesota Attorney General’s Office has a long tradition of fighting and winning for students and borrowers who are just trying to afford their lives. We won’t stop now.”

Rollback of Borrower Defense protections

The lawsuit filed today targets a new Trump Administration rule that blocks avenues for student-debt relief that the Obama Administration put in place in 2016. In response to widespread fraud and abuse in the for-profit-college industry and the disastrous collapse of several large for-profit chains, the 2016 Borrower Defense regulations provided defrauded borrowers an efficient pathway to get relief from their federal student loans, and created deterrents to prevent future predatory conduct. When Congress passed the Higher Education Act, it directed the Secretary of Education to create a meaningful process for students to obtain federal student-loan relief where their schools engaged in fraud or other misconduct. Consistent with this mandate, the 2016 Borrower Defense regulations provided defrauded borrowers access to a consistent, clear, fair, and transparent process to seek debt relief.

They also protected taxpayers by holding schools that engaged in misconduct accountable and ensuring that financially troubled schools put in place financial backstops to ensure that, if they failed, taxpayers would not be left holding the bag.

Upon taking office, however, Secretary DeVos demonstrated public hostility to the borrower-defense process. Just two weeks before the 2016 regulations were set to go into effect, she unlawfully delayed them. A coalition of 20 attorneys general, including the Minnesota Attorney General’s Office, successfully sued DeVos over the illegal delay. Then, in November 2019, Secretary DeVos issued regulations that replace the Borrower Defense regulations and create a new process that is designed to thwart relief for defrauded students and shield predatory schools from being held accountable.

In the lawsuit filed today in the U.S. District Court for the Northern District of California, the coalition of attorneys general argue that Secretary DeVos’s repeal and replacement of the 2016 borrower-defense regulations violates the Administrative Procedures Act because:

• It is arbitrary and capricious. The decision to repeal and replace the 2016 rule was not the product of reasoned decision. In explaining its rationale for the new regulations, the Department of Education rejected prior agency determinations going back decades without explanation, grounded its analysis in fundamental misunderstandings, failed to consider alternatives, and disregarded facts and circumstances.

• It does not comply with Congress’s requirement that the Secretary implement a meaningful process for borrowers to obtain relief. Instead, it establishes an illusory process that makes it practically impossible for students to qualify for borrower defense relief. The Department admits as much by acknowledging that only around 4 percent of borrowers eligible for relief will actually get relief.

AG Ellison brought today’s lawsuit challenging the new Borrower Defense Rule with the attorneys general of California and Massachusetts, who co-led it, and the attorneys general of Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Michigan, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Wisconsin, and the District of Columbia.

Repeal of “Gainful Employment” safeguards

Today’s lawsuit follows just three weeks after Attorney General Ellison sued to halt Secretary DeVos from discarding Obama Administration protections that prevent the federal government from subsidizing for-profit schools that sell worthless degrees. For years, many for-profit and vocational colleges spent hundreds of millions of dollars in marketing to convince students to enroll in expensive academic programs that did not provide value or training necessary to pursue gainful employment.

Many of these poor-performing schools resorted to aggressive and deceptive practices that the Minnesota Attorney General’s Office and other state and federal regulators have prosecuted in legal enforcement actions. A prime example is the Attorney General’s Office’s years-long successful Minnesota School of Business/Globe University lawsuit. Those schools’ practices left Minnesotans in piles of debt and without the ability to get a job in the field the schools promised.

In response to these practices, the Obama Administration issued a rule in 2014 to (a) require for-profit and vocational schools to disclose metrics to inform students’ enrollment decisions and (b) identify the worst programs and ultimately prevent them from being subsidized with taxpayer-funded financial aid. This was known as the “Gainful Employment” Rule, named for the provision in the Higher Education Act that it enforced.

When he was a member of Congress, Attorney General Ellison spoke on the House Floor strongly in favor of the rule as a necessary safeguard to prevent abuses against students and to protect taxpayer dollars.

As she did with the Borrower Defense Rule, Secretary DeVos immediately began efforts to repeal the Gainful Employment Rule. In 2019, she issued a final “Repeal Rule” that completely discards the Gainful Employment Rule’s protections. The Repeal Rule gave license to the worst-performing schools to take advantage of students.

By repealing those protections, the Trump Administration has effectively announced that it will not enforce a key part of the Higher Education Act. This action was taken without justification and is illegal under federal law governing administrative agencies. The lawsuit asserts that Secretary DeVos’ “decision to repeal the GE Rule without promulgating any alternative standard for implementing the Higher Education Act’s Gainful Employment provision is arbitrary, capricious, and contrary to law … and must be set aside.”

AG Ellison brought the lawsuit challenging the repeal of the Gainful Employment Rule on June 24 as part of a multistate group of attorneys general, which is co-led by Pennsylvania, Maryland, Colorado, and New Jersey, along with Connecticut, Delaware, District of Columbia, Illinois, Massachusetts, New York, North Carolina, Oregon, Vermont, Virginia, and Wisconsin.