Arbitration rule at the Department of Education is under attack

In case you missed it earlier this month, the Trump Administration has indicated it will turn its back on another Obama-era rule, this time at the Department of Education (ED). In November 2016, ED announced a new rule to protect federal student loan borrowers who are victims of fraud and other misconduct by predatory schools, often in the for-profit college industry. Among the rule’s important provisions is a requirement that any school participating in the Federal Direct Loan program agree not to rely on or enforce predispute arbitration agreements with students for the resolution of claims related to the Direct loans or the education financed by those loans.

An industry group sued to stop the rule last month, and on June 16, ED formally announced that it would delay the rule’s July 1 effective date, using the ongoing litigation as cover for the delay. The agency also announced that it would undertake a new rulemaking in what it’s calling a “regulatory reset.”

On behalf of two borrowers who would benefit from the Obama-era rule’s provision regarding forced arbitration, Public Citizen and the Project on Predatory Student Lending moved to intervene as defendants in the industry challenge to the rule, arguing—as is evident at this point—that the Trump administration can’t be trusted to represent the borrowers' interests.

A copy of the motion is here.

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