Chicago – Attorney General Kwame Raoul, along with 23 attorneys general, filed an amicus brief on Wednesday in support of the U.S. Department of Education’s Borrower Defense Rule, which protects student loan borrowers who experience fraud and abuse by educational institutions and safeguards defrauded borrowers from being burdened with student loan debt.
The brief is filed with the U.S. Court of Appeals for the 5th Circuit in Career Colleges and Schools of Texas (CCST) v. U.S. Department of Education et al., a lawsuit brought by a trade association representing for-profit schools challenging the department’s Borrower Defense Rule. The rule permits borrowers to discharge their student loans on the grounds that they were defrauded by their educational institutions. The trade association, CCST, argues that the rule exceeds the department’s authority under federal law. Raoul and the coalition have sided with the department in defending the rule and the important protections it affords borrowers.
“Eliminating the vital protections included in the Borrower Defense Rule will leave student loan borrowers with fewer options to recover and does nothing to hold institutions who defrauded students accountable,” Raoul said. “Student loan borrowers deserve additional protections from fraud – not fewer. I will continue to advocate in support of students and will work to hold institutions that defraud students accountable.”
In their brief, Raoul and the coalition argue for the importance of the Borrower Defense Rule in protecting borrowers who have been victimized by predatory institutions. For instance, Raoul and the coalition highlight situations where state investigations have revealed wrongdoing by predatory institutions, and the Borrower Defense Rule has augmented other remedies available via state enforcement actions by providing borrowers with the possibility of discharging their federal student loans that were based upon institutions’ fraudulent misconduct. This not only grants meaningful relief to borrowers but also deters future institutional misconduct.
Raoul and the coalition also describe how states regularly investigate and take enforcement action against predatory postsecondary institutions through their consumer protection offices to redress widespread and systemic unfair and deceptive practices, primarily by private, for-profit institutions. The states’ experiences assisting thousands of student borrowers to secure meaningful relief under prior versions of the department’s borrower defense regulations demonstrate the importance of such relief.
The Illinois Attorney General’s office has long been a national leader in investigating and enforcing consumer protection violations in the higher education field. In June, Raoul issued a consumer alert urging student loan borrowers to be aware of scam calls, emails and letters from fraudsters pretending to be loan servicers or promising debt relief following the U.S. Supreme Court’s decision striking down the federal government’s student loan debt forgiveness plan. In January 2022, Raoul announced a $1.85 billion settlement with Navient, formerly the nation’s second largest student loan servicer, to resolve allegations of widespread abuses in their student loan origination and servicing business.
Attorney General Raoul’s office also worked to pass a “Know Before You Owe” law to alert borrowers of their remaining federal student loan eligibility to help them steer clear of predatory private loans like those provided by Navient.
Joining Raoul in filing the brief are the attorneys general of California, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Washington and Wisconsin.
