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*FOR IMMEDIATE RELEASE:*

October 11, 2023




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AG Nessel Joins Multistate Amicus Brief in Support of Stronger Relief Options for Borrowers Harmed by Predatory Institutions





" The multistate brief urges the Fifth Circuit to uphold the U.S. Department of Education’s student loan discharge authority and other protections for harmed borrowers."





*LANSING* – Michigan Attorney General Dana Nessel has joined a coalition of 23 attorneys general in filing an amicus brief with the U.S. Court of Appeals for the Fifth Circuit in the case "Career Colleges and Schools of Texas v. U.S. Department of Education, et al. "The amicus brief urges the court to uphold the Department of Education’s “Borrower Defense Rule,” which ensures protections for student loan borrowers who experience fraud and abuse by educational institutions and safeguards defrauded borrowers from being burdened with student loan debt. 

The amicus brief was filed in support of the U.S. Department of Education in a lawsuit brought in February 2023 by the Career Colleges and Schools of Texas (CCST), an organization representing for-profit colleges and trade schools, which seeks to challenge the Department’s “Borrower Defense Rule.” The Rule, among other protections, allows borrowers who experienced certain misconduct on the part of their schools to receive debt forgiveness on their federal student loans. 

“The Borrower Defense Rule is vital to protecting student loan borrowers from fraudulent or abusive practices by their financial or educational institutions. However, states alone cannot relieve students of the burden of federal student loan debt incurred from institutional misconduct,” said Nessel. “We need federal regulations like the Borrower Defense Rule to prevent bad actors at for-profit colleges from exploiting their students. I gladly stand with my colleagues in asking the Court to uphold the full implementation of this Rule.” 

In April 2023, CCST filed a motion for a preliminary injunction against the student borrower protections. The motion was initially denied by the federal trial court but then granted pending CCST’s appeal by the Fifth Circuit in July 2023, allowing CCST to temporarily evade compliance with the Department’s borrower defense protections. CCST’s appeal from the trial court’s denial of a preliminary injunction is set to be heard in November 2023. 

The amici states’ brief describes 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’ experience assisting thousands of student borrowers to secure meaningful relief under prior versions of the Department’s borrower defense regulations demonstrates the importance of such relief. CCST’s lawsuit seeks to eliminate such critical protections.  

The amici states describe the importance of the Department’s “Borrower Defense Rule” and argue that the Rule has been lawfully implemented by the Department in accordance with the federal Higher Education Act. In cases where state investigations have revealed wrongdoing by predatory institutions, the Rule augments the 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—thereby not only granting meaningful relief to borrowers, but also deterring future institutional misconduct. 

The amici states’ brief also rebuts CCST’s claim that, in order to be eligible for borrower defense relief based on their schools’ misconduct, borrowers must first go into default, with all the grievous harms default entails for borrowers, their families, and their communities. Rather, the amici states argue, the Department has the legal authority to grant student loan discharge through the Rule for borrowers who affirmatively seek it. 

In accordance with the states’ experience investigating widespread and systemic misconduct and wrongdoing by predatory institutions, which often impacts large cohorts of borrowers, the amici states further argue in support of the Rule’s group application process. This process enables the states to file discharge claims on behalf of groups of affected borrowers instead of on a student-by-student basis. Not only does the Rule’s group discharge process better ensure that larger numbers of harmed borrowers are able to access relief, but also acts as a more cost-effective method of recourse than adjudicating individual claims. 

A copy of the full multistate amicus brief may be found [ [link removed] ]here [ [link removed] ]. 

The amicus brief was led by Massachusetts Attorney General Andrea Joy Campbell. AG Nessel and AG Campbell are joined in filing this brief by California, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Maine, Maryland, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Washington, and Wisconsin.

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