Texas trade association suing to stop new borrower defense rule because it ‘all but ensures’ claims will be approved

Higher Ed Dive

Rick Seltzer

February 28, 2023

Dive Brief:

• A trade association representing more than 70 for-profit higher education institutions in Texas said it will file a lawsuit Tuesday to try to stop new rules governing a federal program that forgives loans for borrowers whose colleges misled them.

• Career Colleges & Schools of Texas said the new regulations for the U.S. Department of Education’s borrower defense to repayment program risk creating “crippling liability” against its members and other colleges in the state. The overhauled borrower defense program, which is set to take effect July 1, creates a process that “all but ensures” borrowers’ claims will be approved, even as it cuts procedures needed to protect colleges against inaccurate loan discharges, the group said.

• The group argues the new borrower defense regulations should be set aside for violating the U.S. Constitution and federal law directing how agencies establish new regulations.

Dive Insight:

Legal challenges have been widely expected since the Biden administration published final regulations for the borrower defense program last year.

Borrower defense vaulted into the limelight in recent years amid concerns about colleges’ recruiting behavior and intense pressure on for-profit colleges. The program has been stuck in a regulatory tug-of-war for the last decade as different presidential administrations rewrote its rules.

The Biden administration’s new regulations include provisions for the Education Department to recoup the cost of forgiven loans from colleges. They also outline several reasons a borrower defense claim can be approved: if a college misrepresented or omitted facts, breached contracts, or engaged in “aggressive and deceptive recruitment.”

And the rules call for using a “preponderance of the evidence” standard to determine whether a claim merits relief, which means asking if a violation is more probable than not to have occurred.

Education Secretary Miguel Cardona said when the new rules were released that accountability is needed and “in recent decades too many students have been left worse off for having gone to college.”

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