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Texas For-Profit Colleges Fight New Borrower-Defense Rules

The Education Department’s latest version of the federal regulations that allow borrowers to apply for relief if their college or university misled them “threatens to irreparably harm the American education system,” a new lawsuit argues.

Career Colleges & Schools of Texas, an association representing career education institutions in the state, is asking a Texas federal judge to declare the borrower defense to repayment rule unlawful. The association argues in its 85-page complaint that the rule violates the law by depriving institutions of due process protections and that the administration failed to meaningfully consider all the comments it received.

The Biden administration has discharged $17.2 billion in student loans via borrower-defense claims and a class action lawsuit, according to the American Enterprise Institute’s student loan forgiveness tracker. The lawsuit was filed on the same day that the administration is defending its signature loan forgiveness program in the Supreme Court, and in the same court—the Northern District of Texas—that first declared that program unlawful.

The new rule, which was finalized last year and will go into effect July 1, makes it easier for student borrowers to seek debt relief from the department in part by expanding eligibility and setting new standards for approving claims.

The department also will be able to discharge loans for an individual or for an entire group—a provision that the lawsuit argues would “increase the risk of erroneous discharge, permitting countless meritless claims to be granted simply by virtue of being ‘grouped’ with one or more legitimate claims.”

“Rather than establish a process that is fair and equitable to both schools and borrowers alike, the Department promulgated a BDR Rule with a thumb on the scale to maximize the number of approved claims and, ultimately, further the administration’s loan forgiveness agenda,” the association said in a news release.

Career Education Colleges and Universities, the national association representing for-profit institutions, supports the lawsuit. It has led a campaign in recent months about the borrower-defense rule’s “devastating impact” and advocated for the department to withdraw the rule, according to a news release.

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