April 28, 2016

Case Builds Against For-Profit Colleges Denying Students Legal Rights

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In recent months, leading Members of Congress, state attorneys general, and non-profit groups have called on the Department of Education to stop colleges that receive federal student aid from forcing students to resolve disputes with their schools in secret arbitration proceedings. (I’ve been active in this advocacy effort.)  After decades of neglecting this issue, the Department of Education appears ready to take steps to protect the right of students to bring their grievances to court.

But the Department has wavered between approaches: fully banning mandatory arbitration clauses or, instead, issuing only a limited ban.

Nothing that advocates have been promoting would prevent students and their schools from mutually agreeing to take an existing dispute to a private arbitration. Rather, the issue on the table is whether colleges can include in the fine print of their enrollment agreements, at the time students sign up, a clause forcing students to take any future dispute to private arbitration, where school misconduct is hidden away from the public and regulators and where corporate parties tend to have the upper hand.

The availability of court remedies is critical not only to providing relief for students who have been deceived or abused by unscrupulous college operators but also to exposing and deterring such bad behavior in the first place. Such a reform could help prevent more debacles like the collapse of and ongoing taxpayer bailout regarding Corinthian Colleges, which had been receiving as much as $1.5 billion a year in federal dollars while engaging in predatory abuses of students; efforts by students to sue for their injuries were thwarted because of mandatory arbitration clauses.

In the past few days, advocates for students have been strengthening the case for a total prohibition on schools forcing students into arbitration:

— Today, the Century Foundation is releasing a report finding that clauses limiting students’ legal rights are the rule at for-profit colleges — affecting 98 percent of students at such colleges receiving federal aid. Meanwhile, such provisions are virtually non-existent at traditional nonprofit and public colleges — and also at for-profit trade schools that do not receive taxpayer-funded student aid. No wonder the for-profit college trade association APSCU, which has long represented institutions getting most of their revenue from federal aid, is so upset about the potential ban on forced arbitration that it could barely issue a coherent press release.

— On April 25, 2016, the Leadership Conference on Civil and Human Rights, joined by 20 groups including the NAACP, National Council of La Raza, and the National Women’s Law Center, sent a letter to Secretary of Education John King urging the Department to ban institutions receiving federal aid from forcing their students into arbitration.  The letter states in part:

Given the widespread problems of fraud, misrepresentation, and discrimination, the massive issue of sexual assault on campuses, and the serious need for transparency as a means to ensure accountability and spur improvement, it should be against public policy for the Department to allow recipients of Title IV funds to escape accountability through the use of forced arbitration. Too many students have already suffered at the hands of for-profit institutions that failed to deliver on their promises or adequately address safety issues on campus. We cannot require these same students to leave crucial legal rights and protections at the school house door.

— In addition, the organization Public Citizen, which in February petitioned the Department of Education for an arbitration ban, has sent the Department a detailed follow-up letter arguing that a partial ban would not adequately protect students.  (I’m on Public Citizen’s board of directors.)

UPDATE 03-29-16: Today, 13 House Democrats and 30 Senate Democrats wrote to Secretary of Education King urging a strong borrower defense rule that includes a full ban on mandatory arbitration in school enrollment agreements. The House letter states, “Mandatory arbitration clauses strip basic legal rights away from students and ban worthwhile actions from ever being heard in court. While proposals limiting the use of this practice against certain classes of students and requiring additional disclosures from schools may place constraints on mandatory arbitration, only a complete ban will guarantee students are fully protected.”

The Senators wrote, “We strongly encourage you to hold colleges accountable by banning mandatory arbitration requirements as a condition of the receipt of federal taxpayer dollars.”

The House signers were: Robert C. “Bobby” Scott (D-VA), Maxine Waters (D-CA), Rubén Hinojosa (D-TX), Raúl M. Grijalva (D-AZ), Marcia L. Fudge (D-OH), Jared Polis (D-CO), Frederica S. Wilson (D-FL), Suzanne Bonamici (D-OR), Mark Pocan (D-WI), Mark Takano (D-CA), Katherine M. Clark (D-MA), Mark Desaulnier (D-CA), and Patrick Murphy (D-FL).

Senate signers were: Patty Murray (D-WA), Tammy Baldwin (D-WI), Richard Blumenthal (D-CT), Barbara Boxer (D-CA), Sherrod Brown (D-OH), Ben Cardin (D-MD), Tom Carper (D-DE), Bob Casey (D-PA), Chris Coons (D-DE), Richard J. Durbin (D-IL), Dianne Feinstein (D-CA), Al Franken (D-MN), Kirsten Gillibrand (D-NY), Mazie K. Hirono (D-HI), Amy Klobuchar (D-MN), Patrick Leahy (D-VT), Jeff Merkley (D-OR), Barbara A. Mikulski (D-MD), Chris Murphy (D-CT), Bill Nelson (D-FL), Gary Peters (D-MI), Jack Reed (D-RI), Bernard Sanders (I-VT), Brian Schatz (D-HI), Charles Schumer (D-NY), Jeanne Shaheen (D-NH), Debbie Stabenow (D-MI), Elizabeth Warren (D-MA), Sheldon Whitehouse (D-RI), and Ron Wyden (D-OR).

This article also appears on Huffington Post