DeVos Freezes Borrower Defense Rule Protecting Defrauded Students - States Sue for Unlawful Delay

Education Secretary Betsy DeVos announced on June 14, 2017, that she would delay implementation of Obama-era “borrower defense to repayment” regulations scheduled to take effect on July 1, 2017—rules designed to help students defrauded by predatory colleges like Corinthian and ITT Tech obtain loan forgiveness. DeVos claimed the regulations offered “free money” and needed revision, effectively freezing relief for tens of thousands of students with pending claims while she rewrote rules to favor for-profit colleges.

The borrower defense rule was created after the 2014-2015 collapse of Corinthian Colleges and the unprecedented number of debt relief claims from students documenting fraud. The Obama rule clarified processes for borrowers to prove fraud, established timelines for Education Department review of claims, and held institutions financially accountable for fraud by requiring them to post surety bonds. It gave defrauded borrowers a pathway to relief despite the 2005 bankruptcy law making student debt non-dischargeable.

DeVos’s delay was a direct gift to the for-profit college industry and a betrayal of defrauded students. By characterizing debt relief for fraud victims as “free money,” DeVos blamed students for being defrauded rather than institutions for defrauding. The delay left students in limbo: unable to get relief, unable to discharge debt in bankruptcy, facing collections and wage garnishment for loans incurred through documented fraud. States attorneys general from Massachusetts, New York, California and 15 others immediately sued, arguing DeVos violated federal law by delaying the rule without proper notice and comment.

The lawsuit revealed DeVos’s approach would be systematic obstruction of student borrower relief. A federal judge later ruled the delay was “unlawful” and “arbitrary and capricious,” finding DeVos had illegally blocked regulations without following proper procedures. But the damage was done: thousands of borrowers waited years for relief while DeVos slow-walked processing, imposed new bureaucratic obstacles, and eventually rewrote rules to make relief nearly impossible to obtain.

DeVos’s actions represented regulatory capture in its purest form: a billionaire with investments in debt collection and ideological opposition to public education, installed through massive family political donations, used her position to protect the for-profit college industry while blocking relief for fraud victims. The borrower defense delay was the first major policy action signaling that the Education Department under DeVos would serve industry interests over student protection. It foreshadowed her subsequent obstruction of Corinthian relief, violation of court orders, and eventual contempt of court finding in 2019.