***VIDEO FILE INCLUDED*** Rep. Lee Addresses Rules Committee in Support of Her Bill to Overturn Sec. DeVos’s Harmful Borrower Defense Rule

January 13, 2020

Washington, D.C. – U.S. Rep. Susie Lee (Nev.-03) delivered remarks to the House Committee on Rules in favor of her Congressional Review Act (CRA) Resolution, H.J.Res. 76, which would overturn the Department of Education's (DOE) 2019 Borrower Defense rule that gutted essential protections for student borrowers and taxpayers.

The House of Representatives is expected to vote on Rep. Lee's resolution later this week.

Below are Rep. Lee's remarks as prepared for delivery to the House Committee on Rules:

Thank you, Mr. Chairman, Ranking Member Cole, and other Members of the Committee, for this opportunity today.

This will be the first time that the House of Representatives will consider a Congressional Review Act (CRA) in the 116^th Congress. Many of you who have been here for a while voted on CRAs before, but for my fellow Freshman members: The CRA is a Resolution of Disapproval that allows Congress to overturn recent regulatory actions of federal agencies with a simple majority vote in both chambers.

My resolution would overturn the U.S. Department of Education's 2019 Borrower Defense rule.

Before I get to why we need to overturn the new rule, I want to delve into some recent history and elaborate on why Borrower Defense is important for our nation's students.

Predatory colleges have been at the core of scandals for decades. Going back to the ‘80s, the scandals surrounding predatory for-profit schools were so severe that President Reagan's Education Secretary, William Bennett called it "an outrage perpetrated not only on the American taxpayer, but most tragically on some of the most disadvantages and most vulnerable members of society." That is what led to the 1992 Higher Education Act that had the first regulations and guidelines to Borrower Defense relief.

Fast forward to 2015, Corinthian Colleges collapsed overnight, leaving 16,000 students without options to finish their degrees and with mountains of debt. Shortly thereafter, in 2016, ITT Technical Institute abruptly shuttered, leaving 40,000 students, including 7,000 student veterans, in the same predicament.

These collapses came following years of documented predatory behavior. These students were defrauded, plain and simple. They were lied to about their prospects for getting a job after graduating, they were lied to about their credits being transferable, and they were lied to about the quality of education would receive.

In 2016, the previous Administration issued a new Borrower Defense regulation, that not only created a streamlined process for defrauded student borrowers apply for and receive relief, but also protected taxpayers by holding predatory institutions accountable for the cost of loan relief due to fraud.

When Secretary Betsy DeVos took over the Department of Education, she rewrote the Borrower Defense rule, which makes it unreasonably difficult for borrowers to apply successfully for relief, severely restricts how much relief borrowers can receive, and shifts the cost of providing debt relief from predatory schools to taxpayers. Basically it makes it almost impossible for defrauded students to seek relief.

This injustice is not hypothetical. Look no further than the FTC's record $191 million settlement from the University of Phoenix. The University used deceptive ads that gave the false impression that University of Phoenix partnered with high-profile companies like Microsoft and Twitter to place students into jobs. In the words of the FTC's Director of the Bureau of Consumer Protection, [QUOTE] "Students making important decisions about their education need the facts, not fantasy job opportunities that do not exist." [END QUOTE.]

But guess what? Under the new 2019 Borrower Defense rule, most, if not all, students who were deceived by University of Phoenix in 2012 and 2013 won't be eligible to seek the loan relief they have a right to under the HEA.

It's clear that the 2019 Borrower Defense rule prioritizes the enriching of predatory schools over protecting defrauded students and American taxpayers.

The changes taken in whole in the 2019 rule will result in fewer defrauded students seeing the relief they are entitled to under the Higher Education Act. According to outside analysts, using the Department of Education's own data, it is estimated that under the 2016 rule, 53 percent of the eligible loan debt would be discharged. Under the new rule, that number drops to three percent.

This is because the new 2019 rule creates an outrageously high burden of proof for the defrauded student to get relief. Under the new rule, borrowers would have to prove that the institution engaged in misrepresentation deliberately. Even when that same institution has clearly violated the law, that is not enough proof if the student borrower cannot prove intent. As many of my colleagues who are lawyers know, it sometimes huge investigations over the course of many years to find this type of evidence. For working students with families and a budget, hiring a lawyer is not realistic and not financially possible. And more importantly, defrauded students should not need a lawyer to get relief.

The argument you will hear over and over again from proponents of the 2019 Borrower Defense rule is that the 2016 rule was too costly to taxpayers, and the new rule saves taxpayer dollars. If saving the money was the true goal, the new rule would keep in place the early warning system in the 2016 rule that gave the Department greater oversight of an institution's financial health. However, that is not the case.

The 2019 rule weakens the early warning system created by the 2016 rule that ensures predatory schools facing allegations of widespread fraud are forced to set aside money to cover the potential cost of debt relief. According to an analysis based on the Education Department's own data, the changes to early warning system will result in institutions repaying only 1 percent of debt relief for defrauded borrowers. The other 99 percent will be paid by taxpayers.

So, as you can clearly see, the new 2019 Borrower Defense Rule makes it harder for defrauded students to receive relief and easier for predatory for-profit institutions to escape accountability. The Higher Education Act gives students the right to relief and this rule blatantly thwarts Congressional intent. If we believe every student deserves a shot at success without drowning in debt, if we believe that businesses should be held accountable for fraudulent behavior, and if we truly believe education is a national priority, then we must overturn the 2019 Borrower Defense Rule and pass this resolution.

There's no doubt that many more students will be defrauded.

The Department of Education's own estimates expects misconduct by predatory schools to impact hundreds of thousands more students – 200,000 in 2021 alone. With borrowers shouldering 97% of those loans.

Many of you represent thousands of defrauded students with a median debt of eleven thousand dollars – many of them are low income, low information, first-time students.

We need the systems in place to help them seek relief. The first step to doing that is passing this CRA and overturning the 2019 Borrower Defense Rule.

Thank you.

BACKGROUND: A copy of today's House resolution of disapproval is available here. A copy of today's Senate resolution of disapproval is available here.

The DeVos borrower defense rule makes it more difficult for borrowers who are defrauded by their school or harmed by their school's closure to receive the relief to which they are entitled, and which Congress intended, under the Higher Education Act (HEA). Specifically, the DeVos rule:

Cuts $11.1 billion in expected relief to students compared to the 2016 rule, currently in effect, by making it more difficult for borrowers to obtain relief;
Increases the burden on defrauded borrowers to gather and submit, often impossible to obtain, evidence to prove their claim including that the school intentionally harmed them;
Requires borrowers to apply individually for relief rather than receiving automatic discharges when a group of borrowers has been harmed by widespread fraud or misconduct;
Establishes a statute of limitations on claims—expiring 3 years after leaving school—despite the fact that a school's misconduct often doesn't become known until many years after it;
Eliminates judgments against a school for misconduct as a sufficient ground for a borrower to receive a discharge;
Eliminates prohibition on class action bans and mandatory arbitration clauses from the 2016 rule—practices used, primarily in the for-profit college industry, to prevent students from suing a school for misconduct in court;
Eliminates ability for borrower whose claims are denied from having their claims reconsidered with new evidence;
Eliminates automatic closed school discharge provision from the 2016 rule for schools that close after July 1, 2020—provision requires automatic discharge of loans for any borrower who has not enrolled in another Title IV program within three years of the school's closure.

The Congressional Review Act (5 U.S.C. §801-808) gives Congress the authority to overturn rules promulgated by federal agencies. A CRA resolution of disapproval must be passed by both the House and the Senate and signed by the President in order to overturn a rule. The CRA provides expedited procedures in the Senate for a resolution of disapproval to be considered on the floor—allowing discharge from committee upon the petition of 30 Senators, after which any Senator can bring a resolution to the floor with only a simple majority needed for passage if certain procedural steps are met. If a CRA resolution of disapproval is passed by both chambers in Congress and signed by the President, the rule has no effect and the agency is prohibited from reissuing the disapproved rule in "substantially the same form" in the future.

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Issues: Congress Students & Education