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ED Delays Final Regulations on Borrower Defense, Gainful Employment

October 03, 2018

Department is working to replace Obama-era rules in both areas

​The Department of Education (ED) will miss a key deadline this fall to release final regulations to replace the borrower defense and gainful employment rules implemented by the Obama administration, Bloomberg Government reported today. Both rules were expected to be released by Nov. 1. By missing the deadline, the earliest date the new rules could go into effect would be July 1, 2020.

The Obama-era borrower defense rule was designed to assist student borrowers in determining their eligibility for loan forgiveness and prevent predatory institutions from taking advantage of prospective students. It was finalized in 2016 and scheduled to take effect in July 2017, but Secretary of Education Betsy DeVos decided to postpone the effective date and undergo a new rulemaking process to revise it. 

When that process failed to produce a consensus, the department proposed its own revisions to the rule. ACE and 20 other higher education associations submitted comments in August on the proposal, writing that it “would make asserting a successful claim functionally impossible,” impacting both student borrowers and eliminating accountability “for the worst actors and incentivize practices we know to be harmful to students.”

Following President Trump’s inauguration, ED reportedly stopped approving thousands of pending claims filed under these earlier regulations. As of mid-2017, the number of outstanding claims climbed to more than 65,000.

Complicating the department’s effort to craft new regulations, a federal judge last month ruled against DeVos in a lawsuit accusing her of illegally delaying the Obama administration’s rule. Judge Randolph Moss of the U.S. District Court for the District of Columbia called the delay “unlawful,” “arbitrary and capricious,” and “procedurally invalid.” 

Moss put his ruling on hold for 30 days—until Oct. 12—to give ED a second chance to come up with a justification for delaying the rules that “passes legal muster,” as Politico ​wrote last week.  If the judge rules against ED, the Obama administration version of the rule could be reinstated   until a new rule is finalized, which would then go into effect in July 2020.

Gainful Employment Rule Also Delayed

ED announced in August that it also would rescind the Obama administration’s gainful employment rule, which penalized certain higher education programs that graduated students with too much debt relative to their earnings. Along with 21 other higher education groups, ACE submitted comments​ last month on this proposal, advising ED to revise rather than eliminate the existing rule. 

ED told Bloomberg that the new gainful employment rule “will hopefully be finalized before the end of the year, although an exact timeline was hard to estimate given the role other agencies have in the regulatory process.” ​

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