Friday, June 16, 2017
The For Profit Empire Strikes Back: DOE Announces Regulatory Rollback of Gainful Employment Requirement and Student Protection from Loan Fraud by Institutions
Currently approved BDR claims to be discharged this month, claims to continue to be processed
Today, U.S. Secretary of Education Betsy DeVos announced the Department's intention to establish rulemaking committees on Borrower Defense to Repayment (BDR) and Gainful Employment (GE) regulations. The Department intends to develop fair, effective and improved regulations to protect individual borrowers from fraud, ensure accountability across institutions of higher education and protect taxpayers.
"My first priority is to protect students," said Secretary DeVos. "Fraud, especially fraud committed by a school, is simply unacceptable. Unfortunately, last year's rulemaking effort missed an opportunity to get it right. The result is a muddled process that's unfair to students and schools, and puts taxpayers on the hook for significant costs. It's time to take a step back and make sure these rules achieve their purpose: helping harmed students. It's time for a regulatory reset. It is the Department's aim, and this Administration's commitment, to protect students from predatory practices while also providing clear, fair and balanced rules for colleges and universities to follow."
Due to pending litigation challenging the BDR regulations, the Department is postponing the effective date pursuant to section 705 of the Administration Procedures Act. While negotiated rulemaking occurs, the Department will continue to process applications under the current borrower defense rules.
"Nearly 16,000 borrower defense claims are currently being processed by the Department, and, as I have said all along, promises made to students under the current rule will be promises kept," said Secretary DeVos. "We are working with servicers to get these loans discharged as expeditiously as possible. Some borrowers should expect to obtain discharges within the next several weeks."
Postsecondary institutions of all types have raised concerns about the BDR regulations since they were published on Nov. 1, 2016. Colleges and universities are especially concerned about the excessively broad definitions of substantial misrepresentation and breach of contract, the lack of meaningful due process protections for institutions and "financial triggers" under the new rules.
As part of the Department's regulatory review of its regulations, the agency will also convene a second negotiated rulemaking committee on Gainful Employment. As the Department worked on implementing this regulation, it became clear that, as written, it is overly burdensome and confusing for institutions of higher education.
The Department plans to publish its Notice of Intent to Conduct Negotiated Rulemaking on BDR and GE in the Federal Register on June 16, 2017. The Department will conduct public hearings on BDR and GE on July 10, 2017, in Washington, D.C. and July 12, 2017, in Dallas, Texas.