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U.S. District Court rejects challenge to rules enabling defrauded students to cancel loan debts

Consumer Reports calls on Education Department to implement borrower defense rules without further delay

 October 16, 2018

WASHINGTON, D.C. – A U.S. District Court rejected a challenge today by for-profit colleges to block the implementation of federal rules from 2016 that would enable students defrauded by schools to cancel their loan debts.  The court had previously ruled that a decision by Education Department Secretary Betsy DeVos to delay the rules adopted during the Obama Administration was “arbitrary and capricious.”  Today’s ruling clears the way for those rules to go into effect, meaning defrauded students may once again have a path to relief.

“Today’s decision is a victory for students across the country who’ve been ripped off by for-profit schools that promised a quality education but delivered a pile of loan debt,” said Suzanne Martindale, senior attorney for Consumer Reports, the advocacy division of Consumer Reports.  “Students who have been defrauded deserve relief – not more delays and the runaround by the Department of Education.  We’ll be monitoring the Department closely to make sure it treats students fairly by implementing these borrower defense rules faithfully.”

A new set of rules proposed by the Department of Education in August would have made it practically impossible for students who’ve been defrauded by higher education programs to cancel their debts.  However, the Department missed a deadline for reviewing the public comments on the proposal, which means that if the Department issues new rules, they won’t be able to go into effect until July 2020 at the earliest.

Students across the country – especially those from low-income communities and communities of color, as well as service members and veterans – have been targeted with aggressive sales pitches from schools that market training that will lead to good jobs, but fail to deliver on those promises.  Many students take out student loans to attend these programs, only to struggle to find a good paying job when they graduate.  Students who attended schools that failed in recent years, like scandal-plagued Corinthian College and ITT Tech campuses, have been left in debt without getting the training they sought after those schools closed.