A federal judge ruled Wednesday that the U.S. Department of Education’s delay of rules meant to protect student loan borrowers from predatory practices was “arbitrary and capricious,” granting a legal victory to the state of California and borrowers who say their colleges defrauded them.
If upheld, the ruling could make it easier for students like the tens of thousands of Californians left in the lurch when for-profit chain Corinthian Colleges abruptly closed its doors to recoup their investments.
Corinthian’s 2015 collapse prompted the Obama Administration to issue new rules the following year allowing groups of students to apply for federal loan forgiveness en masse if their college closed, misled them or broke the law. The so-called “borrower defense rules” were hailed by consumer advocates and criticized by representatives of the for-profit college industry, who said they would put small vocational schools out of business.
The Trump administration has repeatedly pushed back implementation of the rules, and in August proposed a new plan that would make each individual borrower prove that their college knowingly lied to them in order to have loans discharged.
But Judge Randolph S. Moss agreed with the complaint filed by a pair of student borrowers, joined by the attorney generals of 19 states including California, that the department illegally “failed to offer a reasoned basis” for the shift in policy. The two sides are scheduled to meet in court Friday to discuss remedies in the case.
“This is a big win for students in California and the nation who were cheated of a quality education,” said California Attorney General Xavier Becerra, who has filed multiple lawsuits on behalf of student loan borrowers.
The Department of Education did not reply to requests for comment late today.
Track all of California’s lawsuits against the Trump administration here.