Speaker 1: You're listening to Bloomberg law. A few months before Barack
Speaker 1: Obama left office, his Education Department issued new rules governing
Speaker 1: student debt and claims by borrowers that they were defrauded
Speaker 1: by the school. The rules were the product of two
Speaker 1: years of negotiation, and they were set to take effect
Speaker 1: this last July the first, but Donald Trump's Education Secretary
Speaker 1: Bessie de Vos last month blocked implementation of the rules
Speaker 1: and said the department would would rewrite them. Now she
Speaker 1: is facing a lawsuit by nineteen state attorneys general. Seventeen
Speaker 1: state attorneys general excuse me who say that that the
Speaker 1: vas would leave students at risk. It all has important
Speaker 1: implications for colleges, student borrowers, and taxpayers. And with with
Speaker 1: us to help sort it all out is Catherine Lee Carey,
Speaker 1: special counsel at the law firm Cooley Kate. Thanks for
Speaker 1: joining us, um. These are complicated rules are a lot
Speaker 1: of different aspects to them, including standards that apply when
Speaker 1: students who say they were defrauded. I want to get
Speaker 1: out of having to pay the debts. What are the
Speaker 1: attorneys generals seem most focused on in their lawsuit? Well,
Speaker 1: thanks for having me and you're right, very complicated. The
Speaker 1: ages are focused on two primary issues, one being what
Speaker 1: they considered to be deprivation of rights and benefits for
Speaker 1: their enforcement actions, and the other being um what they
Speaker 1: consider to be harmed to students if the regulations are
Speaker 1: rolled back. Specifically, as part of the new rules, the
Speaker 1: Department of Ed would have considered as part of their
Speaker 1: process for determining whether or not student claims had a
Speaker 1: basis or if a group claim could be created, would
Speaker 1: be using an AG's successful enforcement action against the school. So,
Speaker 1: by virtue of incorporating the a G action specifically into
Speaker 1: the rule, it more uh directly connected the AG's work
Speaker 1: to protect students into the actual regularly. And then the
Speaker 1: other piece of it is the idea of deterring what
Speaker 1: they consider to be predatory behavior of schools with the
Speaker 1: financial responsibility requirements that are in the rule. And then
Speaker 1: on the student side, they they are primarily focused on
Speaker 1: the idea of students having the personal um rights of
Speaker 1: action against the school through litigation as opposed to arbitration
Speaker 1: or class action that has that would would have been
Speaker 1: essentially barred by the July one rule, where schools could
Speaker 1: not force a student to enter into an arbitration agreement
Speaker 1: or a class action waiver prior to UM an actual
Speaker 1: dispute coming up, So those are sort of the primary
Speaker 1: focuses of the a G suit. Kate. This lawsuit came
Speaker 1: three days after the d C. Appeals Court reviewed the
Speaker 1: e p A for unilaterally delaying Obama era methane regulations.
Speaker 1: Did Divace do the same thing here by not engaging
Speaker 1: in the legal process for changing or rescinding regulations? There
Speaker 1: does seemed to be some correlation between the arguments that
Speaker 1: are being made on both sides the There are a
Speaker 1: couple of things that seemed to distinguish the two. One
Speaker 1: is that the e p A rule was already in
Speaker 1: effect and it was just a certain provision of the
Speaker 1: rule that was to go and effect in June that
Speaker 1: they were trying to roll back, as opposed to the
Speaker 1: borrow defense rule, which had not become effective yet at
Speaker 1: the time that they are trying to stay the rule.
Speaker 1: But I do think that there are some similar legal
Speaker 1: issues that will likely come up UM in this a
Speaker 1: G case that's similar to the case that came up
Speaker 1: with the a p A in relation to their authority
Speaker 1: to delay a rule that already went through the negotiated
Speaker 1: rulemaking process without having a new negotiate rulemaking process. So
Speaker 1: there's a lot of the same questions I think in
Speaker 1: both situations. One of the things that Petsy Divas is
Speaker 1: saying in response, or the Education Department of saying in response,
Speaker 1: is that she she took this action in prep because
Speaker 1: there is a lawsuit filed by for profit college is
Speaker 1: against the Education Department challenging this new rule. Is that,
Speaker 1: in your mind a legitimate defense by devas in the
Speaker 1: Education Department or is that that kind of a figli
Speaker 1: for the for for defending what they did. That's a
Speaker 1: great question. Uh. The lawsuit that's brought by um TAPS
Speaker 1: the California Association of Private post Secondary Schools is first
Speaker 1: of all, not all for profit schools, just to put
Speaker 1: that out there. There There mostly for profit, but there's some
Speaker 1: nonprofits in there too. UM. The underlying claims in the
Speaker 1: CAPS lawsuit are focused on, Uh. The essentially what their
Speaker 1: argument is that that that it wasn't appropriately drawn regulations
Speaker 1: to begin with, that it violates the h A goes
Speaker 1: beyond the scope of the statutory authority, and so what
Speaker 1: they're claiming is that the rule itself is arbitrary and
Speaker 1: capricious and should never have been UM sort of published period.
Speaker 1: So it is something that I think that an agency
Speaker 1: like the Department of Ed UM would have to obviously
Speaker 1: look at and consider and determine whether or not they
Speaker 1: think there's merit there or there's the chance that they
Speaker 1: might lose UM, which I think was part of the
Speaker 1: argument that that the Secretary is making. UM. But it
Speaker 1: is similar arguments that the a G is making to
Speaker 1: the e p A case, which is that the idea
Speaker 1: that this CAP's lawsuit as the basis for the delay
Speaker 1: is somehow pretextual. UM. I think that it's a very
Speaker 1: similar argument. I frankly, I'm not I'm no way claimed
Speaker 1: to be an Administrative Procedures Act ex person, but UM,
Speaker 1: I can tell you that there is there's some UM
Speaker 1: potential underlying UM similarity there that that I'm sure that
Speaker 1: the ages will bring into their arguments. UM. I frankly
Speaker 1: don't know what the Department of Ed was, you know,
Speaker 1: sort of pondering at the time, and they're they're making
Speaker 1: this decision UM. But obviously the CAP's lawsuit was I
Speaker 1: think it was filed more than a month before the rule,
Speaker 1: so it obviously was part of the consideration whether or
Speaker 1: not it was, um, we're gonna have to I'm afraid
Speaker 1: we're gonna have to leave it there. Thank you. Catherinely
Speaker 1: Carey talking about this new lawsuit by actually nineteen, not seventeen,
Speaker 1: state attorneys general challenging action by the Education Department.