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Alerts and Updates

Private Postsecondary Schools Challenge Validity of Department of Education's Borrower Defense to Repayment Rule

May 30, 2017

Private Postsecondary Schools Challenge Validity of Department of Education's Borrower Defense to Repayment Rule

May 30, 2017

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On Wednesday, May 24, 2017, the California Association of Private Postsecondary Schools (CAPPS) filed a lawsuit in federal court in D.C. against the U.S. Department of Education and Secretary Betsy DeVos challenging the validity of the borrower defense to repayment regulation.  (Note: Duane Morris serves as regulatory co-counsel in this litigation.) The rule, which applies to all colleges and universities that receive Title IV aid, is set to take effect on July 1. 

The lawsuit challenges four key components of the new regulation: the new standards for borrower defense to repayment claims; the financial responsibility measures and triggers; the prohibition on mandatory arbitration clauses and class action waivers; and the student loan repayment rate warnings. The complaint argues that the Department of Education rule exceeds the department’s authority, violates the Administrative Procedures Act and the Federal Arbitration Act and is unconstitutional.

View the full complaint.

About Duane Morris

Duane Morris lawyers provide a wide range of legal services to non-profit and for-profit higher education institutions, and have direct, daily experience and provide advice concerning compliance with federal, state and accrediting body regulations and standards applicable to postsecondary institutions, including the complex rules governing the Title IV student financial aid programs administered by the U.S. Department of Education.

In a recent article published by the Chronicle of Higher Education, Duane Morris Partner Tony Guida examined the borrower defense to repayment rule and made recommendations about measures that institutions of higher education could consider undertaking now to prepare for the July 1 effective date.

For Further Information

If you have any questions related to this Alert, the complaint or compliance with the borrower defense to repayment regulation, please contact any of the attorneys in the Higher Education Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.