NAICU Washington Update

Federal Judge Rules Against DeVos on Borrower Defenses to Repayment Rules

October 01, 2018

A federal judge has ruled against Secretary DeVos’ decision to delay the implementation of the Obama Administration’s borrower defenses to repayment regulations. The court is weighing what pieces of the Obama-era regulations will be implemented and has given the Trump Administration until October 12 to appeal the decision.
It is unclear what the federal judge’s decision that the Department proceeded unlawfully in delaying the Obama-era regulations will mean for the future of the borrower defenses to repayment rules. It is possible that the federal judge could require the Department of Education to implement the Obama Administration’s rules until July 1, 2019 when, presumably, the Trump Administration’s final rules will be scheduled to go into effect. It is also unclear how borrowers who would have otherwise been eligible to file a borrower defenses claim without the Department’s unlawful action will be treated.
The fate of the borrower defenses to repayment regulations has been in limbo nearly two years. The Obama Administration issued final borrower defenses to repayment regulations in November 2016. The regulations were scheduled to go into effect on July 1, 2017. Shortly before the regulations were to be implemented, a trade association primarily representing for-profit career colleges brought a lawsuit seeking a preliminary injunction in order to block the implementation of two key elements of the rules. Prior to the court fully briefing the issue or deciding the case, the Department, on its own accord, decided to delay key parts of the regulations – in effect overriding the lawsuit. The Department also issued an interim rule which delayed the implementation until July 1, 2018. Later, the Department again issued a rule to delay the implementation of the rules until July 1, 2019.
Simultaneously, the Department was engaged in a concurrent process to rewrite the borrower defenses to repayment regulations via negotiated rulemaking. Following the conclusion of the negotiated rulemaking panel’s work in March 2018, the Department issued a proposed borrower defenses to repayment rule. With the public comment window now closed, the Department is likely to issue a final rule in the coming months with a targeted implementation date of July 1, 2019. The proposed rules authored by the Trump Administration differ significantly from the rules promulgated by the Obama Administration.
Final regulations related to the negotiated rulemaking committee are expected in the near future.

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