North Carolina Attorney General Josh Stein recently wrote Secretary Betsy DeVos, criticizing the Department of Education’s (the Department) proposed redraft on borrower defense and financial responsibility regulations. Borrower defense is the process by which students who have been defrauded by their schools can have their federal student loans discharged.
“Secretary DeVos needs to focus on protecting students, not for-profit colleges,” said Attorney General Josh Stein. “Students who borrow money for school are investing in their futures – futures that will make our communities stronger. That is why we need rules that will protect both those students and taxpayers. Secretary DeVos’s proposed rules fail in both regards.”
The letter, which Attorney General Stein signed along with 19 other Attorneys General, highlights some of the most glaring issues. The Department:
- proposes a “federal standard” applicable to borrower-defense claims that is wholly inadequate and would serve only to limit defrauded students’ access to critical loan relief;
- proposes a borrower-defense process that excludes any role for state attorneys general;
- proposes imposing a three-year statute of limitations on borrower-defense claims. The imposition of any statute of limitations on these claims is patently unfair;
- proposes preserving mandatory arbitration, which denies students their day in court and prevents information about the few disputes that are brought from ever coming to light; and
- fails to propose a streamlined process to discharge groups of similar borrower-defense claims.
The Department’s recent rulemaking comes on the heels of its decision last year to throw out its borrower-defense regulations promulgated in November 2016. These regulations went a tremendous distance to achieving the Department’s then-stated goal of giving defrauded borrowers access to a consistent, clear, fair, and transparent process to seek debt relief. The Department, however, has unlawfully delayed implementation of these rules and decided to draft new rules from scratch. On July 6, 2017, a coalition of Attorneys General sued the Department over this unlawful delay.
In signing today’s letter, Attorney General Josh Stein joins the Attorneys General of the following states: California, Connecticut, Delaware, District of Columbia, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, and Washington.
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