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Attorney General Becerra Sues U.S. Department of Education for Easing Oversight of For-Profit Colleges

ED’s “Distance Education and Innovation” regulations fast-track student loans and Pell grants to schools with little oversight or accountability

SACRAMENTO – California Attorney General Xavier Becerra today announced a lawsuit against Acting U.S. Secretary of Education Mitchell Zais and the U.S. Department of Education (ED) over ED’s effort to ease oversight and accountability on for-profit colleges at the expense of students and taxpayers. ED’s recently finalized “Distance Education and Innovation” regulations allow colleges to bypass requirements set out in the Higher Education Act intended to prevent federal Title IV funds, including federal student loans and Pell grants, from going to low-quality educational programs and predatory for-profit institutions.

“One of the many shameful legacies of the Trump Administration is the extreme lengths taken by its Department of Education to expedite public money to predatory for-profit colleges. Regulations that hold for-profit schools accountable were created to protect students,” said Attorney General Becerra. “ED’s new rules harm California students by steering them away from our excellent public college and university system and into educational programs that are questionable at best, and outright scams at worst. ED’s last-minute attempt to dismantle oversight regulations on for-profit schools will not go unchallenged by California.”

Under the Higher Education Act, both colleges and their educational programs must meet an array of eligibility requirements to participate in Title IV federal student-aid programs, including certification by the Secretary of Education that a college has the administrative capability and financial responsibility to receive federal funds. ED’s new “Distance Education and Innovation” rule illegally eases this review to benefit for-profit institutions. The new rule helps predatory institutions in at least two ways.

  • A school’s recertification application is automatically approved if it has been pending before ED for 12 months. Automatic recertification under these circumstances directly benefits predatory institutions like Ashford University, which Attorney General Becerra sued in 2017 for defrauding students. Troubled schools often require reviews longer than 12 months pending investigation by ED, an accrediting agency, or a state attorney general. 
  • For-profit schools can now outsource 100% of a program’s instruction to a different school. ED’s new rule further leaves students unprotected by repealing an Obama-era cap of 50% on the amount of instruction that a for-profit school can outsource to a school under common ownership. This means that a student can now be forced to take all of their courses at a school they did not enroll in. It also allows for predatory institutions to operate as “portals” that funnel students into low-quality, online programs.

Today’s lawsuit continues Attorney General Becerra’s work to serve and protect student borrowers. In November 2017, Attorney General Becerra sued Ashford University and its parent company Bridgepoint Education for illegal marketing and collections activity, among other abuses; that lawsuit is pending before San Diego County Superior Court. In June 2018, Attorney General Becerra filed a lawsuit against Navient and its subsidiaries for unlawfully misleading student loan borrowers, engaging in illegal collections practices, and steering borrowers to more costly repayment options. In December 2017, Attorney General Becerra filed a lawsuit against ED over its failure to grant promised loan relief to tens of thousands of students defrauded by Corinthian Colleges. In March 2020, Attorney General Becerra filed a lawsuit against ED over its action to repeal student loan borrower protections under the Gainful Employment Rule. In June, 2020, Attorney General Becerra filed a lawsuit against ED for failing to implement the Temporary Expanded Public Service Loan Forgiveness Program. And in July 2020, Attorney General Becerra filed suit against Secretary DeVos and ED for repealing the 2016 borrower defense regulations and replacing them with regulations that would make it nearly impossible for defrauded students to obtain financial relief. 

A copy of the lawsuit is available here.