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LSC’s Project on Predatory Student Lending and Public Citizen Sue to Stop Education Department’s Illegal Regulatory Delay

The U.S. Department of Education broke the law when it announced a delay of a rule designed to protect students defrauded by predatory for-profit colleges and career training programs, two borrowers said in a lawsuit filed today in the U.S. District Court for the District of Columbia. The borrowers are represented by Public Citizen and the Project on Predatory Student Lending of the Legal Services Center of Harvard Law School.

The lawsuit was brought by Meaghan Bauer and Stephano Del Rose, former students of the for-profit New England Institute of Art (NEIA) in Brookline, Mass. They allege that NEIA, which is owned by Education Management Corporation (EDMC), engaged in unfair and deceptive practices against them and other students that left them with a useless education, few job prospects and a mountain of debt. The students intend to bring suit against the school for its conduct in court, on behalf of a class. They also have asserted a federal right to have the Education Department cancel loans that the students obtained to attend the school based on the school’s unlawful conduct. The lawsuit seeks to invalidate the Department’s delay of the rule, and would allow the rule to take effect for all borrowers.

Bauer and Del Rose had been counting on an Education Department rule finalized in November by the Obama administration that prohibits schools receiving federal funds from relying on forced arbitration clauses and class action bans to prevent their students from bringing their claims together and in court. This Borrower Defense rule would ensure that Bauer and Del Rose have their day in court in a suit against NEIA. The rule also would provide Bauer and Del Rose with new protections and transparency when the Education Department considers their applications to have their federal student loans forgiven.

The Borrower Defense rule was slated to go into effect on July 1. In May, however, a trade group brought suit to challenge portions of the rule. And last month, the Department of Education announced it would delay key parts of the rule until that litigation is over. It also announced that it would begin a new rulemaking to reconsider the rule. Under the terms of the law that governs the rulemaking, a replacement could not take effect for at least two years.

In another lawsuit filed today, a group of state attorneys general also has argued that the Education Department’s delay of the rule is unlawful.

Read the complaint and visit this page for more information about the case.