Education Department Must Stop Funding For-Profit Colleges That Force Students to Arbitrate

February 5, 2020

BOSTON – Following a Friday court decision upholding U.S. Department of Education rules intended to stop schools from forcing defrauded students into secretive out-of-court arbitrations, lawyers representing for-profit college students are urging the department to follow that rule and cut off funding of for-profit colleges that violate it.

In a decision issued late Friday in the case California Association of Private Post-Secondary Schools v. DeVos, the U.S. District Court for the District of Columbia upheld provisions of a 2016 regulation issued by the Department of Education that make institutions of higher education ineligible to participate in federal student loan programs if they bar students from bringing class-action lawsuits against the schools or bringing their claims in court.

Lawyers representing the students in the case, from the Project on Predatory Student Lending and Public Citizen Litigation Group, are calling on the department to stop funding for-profit institutions that use these tactics, which are harmful to students.

“The Department of Education has a duty to protect students who have been cheated by their schools and allow them to seek justice, instead of letting schools force them out of court,” said Project Director Toby Merrill. “This ruling makes it clear: The department is supposed to cut off federal student loan dollars to schools that use forced arbitration contracts and class-action bans. The department must take action and enforce this regulation immediately to put student and taxpayer interests above those of the predatory for-profit college industry.”

“As the court held, this was ‘an easy case.’ The Department of Education has the authority to condition the receipt of federal funding on schools’ allowing students access to justice, and the record and experience show that forced arbitration clauses and class-action bans insulate predatory schools from responsibility for their bad behavior,” said Adam Pulver, the lead Public Citizen lawyer on the case.

The protections against forced arbitration and class-action bans are important parts of the 2016 borrower defense rule. They were eliminated in Secretary DeVos’ devastating new borrower defense rule, which takes effect on July 1, 2020.

For more information on the case, please visit here.

About the Project on Predatory Student Lending

Established in 2012, the Project on Predatory Student Lending represents former students of predatory for-profit colleges. Its mission is to litigate to make it legally and financially impossible for federally-funded predatory schools to cheat students.

The Project has brought a wide variety of cases on behalf of former students of for-profit colleges. It has sued the federal Department of Education for its failures to meet its legal obligation to police this industry and stop the perpetration and collection of fraudulent student loan debt.

About Public Citizen Litigation Group

Public Citizen Litigation Group is the litigating arm of Public Citizen, a nonprofit consumer advocacy organization that champions the public interest in the halls of power. Public Citizen defends democracy, resists corporate power and works to ensure that government works for the people.