Defrauded student loan borrowers might be freed from their debt 

A tug-of-war between student borrowers hoping to get tens of thousands of dollars in loans they took out for their education discharged and the government may be a step closer to resolution.

A federal judge ruled this week that repeated delays by Education Secretary Betsy DeVos of an Obama administration plan to provide debt relief to defrauded borrowers was unlawful.

Judge Randolph D. Moss, a federal judge in Washington, D.C., said on Wednesday the Department’s action was arbitrary and capricious.

“We think this is an incredibly important ruling both for cheated student loan borrowers and anyone who cares about the government under the rule of law instead of under the thumb of a predatory, for-profit college industry,” said Toby Merrill, director of the Harvard Law School’s Project on Predatory Student Lending.

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More than 160,000 people have claimed to the government that their school defrauded them, and new applications continue to pour in. Almost all of these complaints come from for-profit schools, of which there are some 7,000 around the country. Together, they take in around 15 percent of the government’s financial aid.

Many of these borrowers have found themselves waiting without answers.

The Obama administration announced a regulation in 2016, known as borrower defense, aimed at canceling the debt of those with degrees from schools that misled or deceived them.

Before the regulation could go into effect in July 2017, an industry group of the for-profit college sector, the California Association of Private Postsecondary Schools, filed a lawsuit with the Education Department, arguing the regulation was outside the government’s authority.

Soon after, the Department announced it was postponing certain provisions of the regulation. Speaking at a conference, DeVos said that under the current rule, “all one had to do was raise his or her hands to be entitled to so-called free money.”

In a hearing on Friday, the California Association of Private Postsecondary Schools continued to challenge the Obama-era regulation. Judge Moss said he would consider the merits of their lawsuit. “The industry is still trying to challenge the regulation,” Merrill said.

Despite the resistance, borrowers and advocates were hopeful from the ruling earlier in the week that DeVos’s repeated delays of the Obama-era plan were unlawful.