August 7, 2023

5th Circuit Blocks Biden Rule Aimed at Protecting Students From College Scams

5th Circuit Blocks Biden Rule Aimed at Protecting Students From College Scams

In 2016, the Obama administration issued a regulation that, for the first time, meaningfully implemented a federal law that allows former students to have their federal loan debt cancelled if there is sufficient evidence that their school scammed them. This borrower defense rule established standards and procedures for students to seek such debt relief, and a process for the government to recoup the losses from bad-behaving schools. It also barred colleges from forcing students to have claims against a school resolved in corporate arbitration proceedings, as opposed to a court of law; for the most part only for-profit colleges have used such forced arbitration clauses.

In 2019, Trump Secretary of Education Betsy DeVos, whose top advisors previously worked for for-profit colleges, issued a new regulation, gutting the Obama rule and making it almost impossible for ripped off students to get loan relief. DeVos also repeatedly trashed efforts by student loan borrowers to get relief under the prior regulations.

Last October, the Biden Department of Education issued a new rule, restoring and strengthening the Obama regulation — renewing hope that ripped-off veterans, single parents, and other victims of predatory colleges might have a chance to reduce the damage they suffered.

However, this morning, a panel of the United States Court of Appeals for the 5th Circuit, headquartered in New Orleans, granted the motion of the Texas association of for-profit colleges, which has sued the Department of Education, and blocked the Biden rule temporarily, and set a November date for the case to be argued. The court provided no discussion of the reasons for its decision. Two of the judges on the panel were appointed by Donald Trump and the third by President Ronald Reagan.

Eileen Connor, president and director of the Project on Predatory Student Lending, which represents career college students in several key litigation matters, issued a statement: “This unexplained order from the Fifth Circuit is a gift to those who wish to operate predatory education schemes with impunity. Borrower defense is an essential safeguard that has been in place for decades. It is necessary to protect students from being scammed and it ensures that predatory actions come to light and are stopped before they go on to harm even more students. These organized, well-funded political attempts to weaponize the court system against the legal rights of borrowers underscore how stacked the system is against our clients. We will continue to fight for them, and are confident that the law, ultimately, is on their side.”

Aaron Ament, president of Student Defense, another non-profit law firm that represents students, offered this statement: “We cannot afford a green light for dishonest schools to continue harming students. Defrauded borrowers are legally entitled to relief and their institutions should be held accountable. Until these protections are restored, countless students are at risk of being taken advantage of by higher ed profiteers who are exploiting students with little accountability.”