FOR IMMEDIATE RELEASE: June 14, 2017

CONTACT: Alexis Goldstein, Americans for Financial Reform
alexis@ourfinancialsecurity.org / 202-973-8005

Americans for Financial Reform strongly condemns the decision of Education Secretary Betsy DeVos to abandon the victims of predatory colleges by delaying the update to the Borrower Defense rule, and creating two new negotiated rulemakings to re-do and likely dismantle both the Borrower Defense and Gainful Employment rules.

“This is a slap in the face to defrauded Americans, and a stunning admission by the Department of Education that they intend to place the interests of wealthy for-profit college executives ahead of students striving for a better life,” said Alexis Goldstein, Senior Policy Analyst at Americans for Financial Reform.

The 2016 Borrower Defense rule update prohibited the use of forced arbitration clauses at schools that receive federal financial aid. Forced arbitration is a practice that denies students the right to hold their school accountable in court when it breaks the law. Delaying this rule and opening it up to revisions sought by the for-profit college industry will mean that countless students wronged by their schools will be denied access to their day in court.

Congress had the opportunity to stop the Borrower Defense rule through the Congressional Review Act, and they chose not to do so. That the Department is now proceeding to delay and dismantle this thoroughly-debated rule anyway shows just how committed they are to serving to the interests of for-profit college executives who are enriching themselves with taxpayer dollars and at the expense of vulnerable students.  

AFR has long called on the Department use its legal authority to discharge the debts of wronged students without individual application – as have former Corinthian students, advocates, lawmakers, and law enforcement officials, with requests dating back to 2014. It is shocking that even after years of this broad and diverse coalition making a powerful case for automatic cancellation of Corinthian debt, the Department has not only stalled approvals of discharge applications, but has now decided re-do the Borrower Defense rule altogether.

We also oppose the Department’s decision to create a new negotiated rulemaking on the Gainful Employment rule. The Gainful Employment rule advances a common-sense principle: schools that consistently leave students worse off than when they first enroll shouldn’t receive federal financial aid. The rule works to ensure that taxpayers aren’t subsidizing schools that bury their students in debt for a useless degree. The first set of Gainful Employment’s career education program rates, published in January 2017, make clear the utility of this data. Some of the programs that consistently left students with more debt than they could repay were at schools that have since collapsed, such as Westwood College and ITT Tech. Prior to its collapse, ITT faced lawsuits and investigations from regulators and law enforcement alike.

We are shocked and appalled by the Department’s decision today.  If the Secretary is truly committed to protecting students and fighting fraud, the Department must immediately move to discharge the debt of the former students of for-profit colleges that have violated the law, and process all the backlogged Borrower defense applications without any further delay.