Trump administration sued by 18 U.S. states over student loan relief

By Lisa Lambert

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WASHINGTON (Reuters) – More than one-third of U.S. states on Thursday sued the U.S. Education Department and Secretary Betsy DeVos over the recent suspension of rules that would have swiftly canceled student-loan debt of people defrauded by Corinthian Colleges Inc and other for-profit schools.

Last month DeVos pressed pause on the rules, due to take effect on July 1, saying they needed to be reset.

Massachusetts, 17 other states and the District of Columbia said in a filing in U.S. District Court in Washington, D.C. that the department broke federal law in announcing the delay with limited public notice and opportunity to comment.

DeVos, a Republican and advocate of public-private partnerships in education, said she wanted to pause the acceleration of the debt cancellation process because it “puts taxpayers on the hook for significant costs.”

She also said a delay was needed while current litigation in California over the rules works its way through the legal system.

Consumer groups Public Citizen and Project on Predatory Student Lending sued on Thursday to remove the delay as well.

The department did not immediately have a comment on the suits.

The rules were finalized in the last days of the administration of President Barack Obama, a Democrat who overhauled federal student lending.

After Corinthian, a for-profit chain, collapsed in 2015 amid federal and state investigations into its post-graduation employment rates, the administration began drafting rules to help students caught with loans they had taken out for Corinthian tuition.

Obama wanted to prevent students from receiving loans they could not repay after graduation. He specifically targeted for-profit, career colleges that promise students they will find jobs after graduating and can charge high tuition.

The attorneys general for California, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maryland, Minnesota, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia and Washington, all Democrats, also signed onto Thursday’s suit.

They said the department and DeVos were using the pending litigation as “a mere pretext” to repeal the rules and replace them with one that “will remove or dilute student rights and protections.”

The $1.4 trillion student-loan industry became a hot-button issue in last year’s presidential campaign, with Democrats seeking to protect Obama’s reforms and Republicans such as then-candidate President Donald Trump saying the U.S. government should “get out of the business” of lending.

DeVos has worked swiftly since she was confirmed in February to unwind many of Obama’s changes.

(Reporting by Lisa Lambert; Editing by Steve Orlofsky and Cynthia Osterman)