19 attorneys general, including Iowa’s, sue education secretary DeVos

A group of 19 state attorneys general, including Iowa's Tom Miller, are suing Education Secretary Betsy DeVos for delaying an overhaul of rules to erase the federal student debt of borrowers defrauded by colleges.

'Since day one, Secretary DeVos has sided with for-profit school executives against students and families drowning in unaffordable student loans,” Massachusetts Attorney General Maura Healey, who is leading the lawsuit, said in a statement Thursday. 'Her decision to cancel vital protections for students and taxpayers is a betrayal of her office's responsibility and a violation of federal law.”

The complaint, filed in U.S. District Court on Thursday, accuses the Education Department, which did not immediately respond to requests for comment, of violating federal law by halting updates to a regulation known as the borrower defense to repayment. The rule, which dates to the 1990s, wipes away federal loans for students whose colleges used illegal or deceptive tactics to get them to borrow money to attend. The Obama administration revised it last year to simplify the claims process and shift more of the cost of discharging loans onto schools.

Before the changes could take effect July 1, DeVos suspended them last month and said she would convene a new rule-making committee to rewrite the borrower defense regulation, reviving a process that took nearly two years to complete. Proponents of the revised rule were livid that DeVos made a unilateral decision without soliciting or receiving input from stakeholders or public.

DeVos said the delay was necessary as the department fought a federal lawsuit by a group of for-profit colleges in California seeking to block the rules. State attorneys general, including those from Maryland, Virginia and Washington, D.C., argue in their lawsuit that the case is 'a mere pretext for repealing the rule and replacing it with a new rule that will remove of dilute students rights and protections.”

The secretary also said the Obama administration created 'a muddled process that's unfair to students and schools, and puts taxpayers on the hook for significant costs.” But consumer advocates and liberal lawmakers contend that the changes achieve exactly the opposite by speeding up loan discharges and having colleges foot more of the bill.

To limit financial risk to taxpayers, the new rules expand the conditions under which colleges have to get a letter of credit from a bank assuring the availability of at least 10 percent of the total amount of federal financial aid funds it receives. Among the circumstances that would trigger a letter are lawsuits filed by federal agencies, defaults on debt obligations and enforcement action taken by an accreditation agency.

The financial obligation and complexities of the new regulations created consternation among some colleges and universities. In announcing the rule delay, DeVos said she was trying to provide 'clear, fair and balanced rules.”

The secretary said the suspension will have no impact on the tens of thousands of pending claims because the old regulation remains on the books, but state attorneys general say the existing statute doesn't go far enough to protect students. The first set of changes that were supposed to take effect this month would have, for instance, limit the ability of schools to require students to sign mandatory arbitration agreement and class action waivers that are commonly used by for-profit colleges to thwart legal action by students.

By delaying the borrower defense changes, DeVos's critics say she has handed a victory to for-profit colleges and Republican lawmakers that have fought against the rules for years.

Few people used the defense until 2014, when the collapse of for-profit giant Corinthian Colleges ushered in a deluge of claims at the Education Department. That forced the agency to fix the system and create a new standard to judge appeals for debt relief.