THE COMMONWEALTH  OF MASSACHUSETTS 

OFFICE OF  THE ATTORNEY GENERAL 

ONE ASHBURTON  PLACE 

BOSTON,  MASSACHUSETTS 02108 

TEL: (617) 727­2200 

www.mass.gov/ago 

March 18, 2016 

The Honorable John King 

United States Department of Education 

400 Maryland Avenue, SW 

Washington, D.C. 20202 

Mr. Joseph A. Smith 

Special Master 

United States Department of Education 

400 Maryland Avenue, SW 

Washington, D.C. 20202 

Re: Relief to Student Borrowers 

Dear Acting Secretary King and Special Master Smith: 

We, the undersigned Attorneys General of Massachusetts, California, Connecticut, 

Hawaii, Illinois, Kentucky, Maine, Maryland, Minnesota, New Mexico, New York, North 

Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Washington, and the District of 

Columbia, as well as the Executive Director of the Office of Consumer Protection of Hawaii, 

write to share our views on the U.S. Department of Education's ("Department") negotiated 

rulemaking on borrower defense to repayment—the process by which student borrowers preyed 

upon by predatory schools can assert their legal rights to debt relief. In our respective 

jurisdictions, we have grown far too familiar with the fraud and abuse committed by certain 

schools in their efforts to secure federal loan funds and the devastation caused to borrowers. We 

wholeheartedly agree with the Department's express aim for the rulemaking: "to make the 

process of forgiving loans efficient, transparent, and fair—and to ensure students receive every 

penny of relief they are entitled to under law."1 We wish to convey our support for a number of 

the revisions adopted by the Department in its most recent proposal but also call attention to 

areas that may further strengthen borrower defense. We believe that we are close to achieving a 

process that provides rightful relief to victimized students and holds predatory schools 

accountable to taxpayers. 

We are particularly encouraged by three of the Department's changes to the draft rule: (i) 

the establishment of a group discharge process so that students subjected to the same abuses can 

be treated equally and efficiently, although we support revisions to the procedure; (ii) procedural 

changes to ensure that the Department's decision to grant a discharge is not an adversarial 

1 http://www.ed.gov/news/press­releases/education­department­appoints­special­master­inform­debt­relief­process 

(June 25, 2015 public statement by Under Secretary Ted Mitchell). 

1 

MAURA HEALEY 

ATTORNEY GENERAL 

o 
process that pits individual borrowers against schools; and (iii) new rules to limit the use of 

binding arbitration agreements by schools and protect the legal rights of students. We hope the 

Department will consider the following additional revisions at the final meeting of the 

rulemaking committee: (i) complete removal of any statute of limitations for victimized students 

to raise a borrower defense; (ii) language expanding the Department's reliance on the work of 

state attorneys general and other state agencies; and (iii) continued recognition of violations of 

state law as a basis for borrower defense. 

1. Establish a group discharge process 

A significant benefit to students in the Department's updated proposal is the new, 

streamlined group debt relief process in § 685.222(f)­(h). Our investigations and enforcement 

actions have repeatedly unmasked schools that engaged in systemic practices that subjected all 

prospective and enrolled students to the same egregious abuse and deception. As the Department 

recognized, a group process is necessary if we seek to provide relief to all students with a rightful 

claim, and it is consistent with the Department's current regulations and state consumerprotection laws. 

The Department's own experience with implementing borrower defense for Heald 

students is the strongest argument in favor of an automatic group process. On June 8, 2015, the 

Department announced that the seriously misrepresented job placement rates at Heald campuses 

between 2010 and 2014 "entitle the defrauded students enrolled in these programs to a discharge 

2  •   of their Federal Direct Student loans,"  provided they complete an attestation form. The 

, , , T. Department estimated that 50,000 students were eligible for a full discharge,  but reported last 

December that just 1,312 students had navigated the process for seeking relief as of September 

30, 2015—less than 3.0% of those eligible.4 The Department has appropriately responded with 

an approach that removes the burden from students. 

A streamlined, automatic group approach to providing student borrower relief is 

consistent with the Department's current discharge practices and Secretary Duncan's promise to 

"make this [borrower defense] process as easy as possible for them [student borrowers], 

including by considering claims in groups wherever possible."5  Under the rules for seeking a 

closed school discharge, "[t]he Secretary may discharge a loan under this section without an 

application from the borrower if the Secretary determines, based on in formation in the 

Secretary's possession, that the borrower qualifies for the discharge."6 This language, permitting 

automatic, group discharges, is also found in the regulations authorizing discharge for false 

7  i  i  i  8  certification  and Congress empowers the Secretary to adopt this provision. 

2  http://blog.ed.gov/2015/06/debt­relief­for­corinthian­colleges­students/. 

3  https://www2.ed.gov/documents/press­releases/report­special­master­boiTower­defense­l.Ddf. 

4 https://www2.ed. gov/documents/press­releases/report­special­mastei'­borrower­defense­2.pdf. 

5  http://www.nvtimes.com/2015/06/09/education/us­to­forgive­federal­loans­of­corinthian­collegestudents.html?  r=0 . 

s § 685.214(c)(2) (emphasis added). 

7 § 685.215(c)(7). 

8  20 U.S.C 1087e(h) ("[T]he Secretary shall specify in regulations which  acts or omissions of an institution of higher 

education a borrower may assert  as defense to repayment of a loan  ...,). 

2 
Relatedly, the Department's updated draft includes a "rebuttable presumption" that 

students have reasonably relied on a school's substantial misrepresentations that the Department 

determines to be widespread.9 The Department's own definition of a "substantial 

misrepresentation" giving rise to borrower defense is "any misrepresentation to a person on 

which that person could reasonably be expected to rely ... to that person's detriment"10 a 

definition consistent with the unfair and deceptive trade practice laws in many states, which have 

long­recognized the importance of objective standards in distinguishing honest statements from 

fraudulent ones. Establishing a rebuttable presumption allows for an efficient, streamlined group 

process and ensures that when schools engage in patterns of unfair and deceptive conduct, they 

will be held accountable for all of it. 

2. Avoid a process that pits victimized students against schools 

The Department's revised rule no longer pits individual students against their school in 

an adversarial process. We support the Department's new framework and will continue to 

provide assistance in developing a process that is sufficiently simple and straightforward so that 

a student can navigate it successfully without a lawyer. We also support the Department's efforts 

to hold schools liable for reimbursement of discharged loans. However, fair and effective 

defense to repayment procedures must ensure accountability for students and taxpayers by 

preventing schools from making the process burdensome and expensive for borrowers. 

3. Stop predatory schools from forcing students to sign away their legal rights 

We applaud the Department for joining with consumer advocates and attorneys general in 

taking aggressive action to end the use by schools of forced arbitration agreements and similar 

restrictions on students' legal rights. 

In advancing this proposal, the Legal Aid Community negotiator wrote, "When predatory 

schools bind their students to arbitrate any and all disputes that they may have against the school, 

it functions on the whole to suppress meritorious student complaints."11 As attorneys general, we 

have witnessed the effectiveness of binding arbitration in silencing the aggrieved and cutting off 

the private legal rights of our consumers. Not only are consumers forced to waive certain 

fundamental legal rights, but the confidentiality of arbitration proceedings favors institutions at 

consumers' expense, because repeat players benefit from past arbitrations whereas aggrieved 

individuals have no access to precedent. Bans on class and representative actions often make it 

infeasible for students to secure legal representation. Preservation of a private right of action is 

critical to ensure school misconduct and unlawful actions cannot be swept under the rug, and 

students have the ability to seek damages or other legal remedies. 

At a time when the unlawful conduct of abusive educational programs has generated 

ruinous student debts and cheated the taxpayers, we need more legal enforcement and strong 

9 § 685.222(f)(3). 

10 § 668.71(c). 

11 Proposal of Eileen Connor on behalf of the Legal Aid Community, February 11, 2016 (available at 

http://www.legalservicescenter.org/proiect­attomev­urges­department­of­education­to­prohibit­for­profit­coilegesfrom­using­forced­arbitration­to­hide­fTaud­and­deception­of­studeiitsA 

3 
safeguards, not less. As the Department has recognized here, the efforts of govemment agencies 

and the attorneys general cannot effectively counter this misconduct alone and students seeking 

loan forgiveness need access to publicly available complaints and court documents to achieve the 

relief they are owed. For these reasons, we strongly support the Department's proposed 

language. 

We continue to support a few important revisions to the Department's proposal that will 

further strengthen borrower defense. 

1. Remove the statute of limitations 

While the revised statute of limitations language is an improvement over earlier drafts, a 

student borrower is offered just a four­year window to raise a breach of contract or substantial 

misrepresentation by the school as a defense to repayment of a Direct Loan for sums the student 

,  12  .  .  •   has already repaid.  Victimized students in our states are often unfamiliar with their legal rights 

and unaware of the violations committed against them until many years after the fact, if ever. 

Two federal agencies and three states had to complete multi­year investigations before 

Corinthian's Heald, Wyotech and Everest borrowers became aware that they had been deceived 

regarding placement rates. Many of these students have had their wages or tax returns garnished 

by the Department for years and, under the proposed rule, might never be able to recover those 

sums. Moreover, in similar contexts, like false certification discharge, there is no statute of 

limitations to bar recoupment of improper collections. Indeed, the Department's proposal to limit 

student reimbursement to just four years is inconsistent with the position taken by the Corinthian 

Special Master, who has provided reimbursements beyond four years. For these reasons, we urge 

•   •   •   •   •   1 

you to remove the statute of limitations for raising a borrower defense entirely. 

2. Expand reliance on the work of state attorneys general and other government agencies 

The Department's draft proposed rule allows distressed student borrowers to secure debt 

relief on the basis of an investigation or enforcement action by a state or federal agency only if 

the agency obtains a "contested judgment" against the school.14 This rule is too narrow to be 

effective and is inconsistent with the Department's commitment to "whenever possible,. . . rely 

on evidence established by appropriate authorities in considering whether whole groups of 

students (for example, an entire academic program at a specific campus during a certain time 

frame) are eligible for borrower defense relief."15 State attorneys general often settle cases or 

resolve investigations in order to secure monetary relief that aids both students and taxpayers. 

Attorneys general should not be forced to forego restitution and litigate with schools in order to 

ensure that investigative findings  can form the basis of a defense to repayment for affected 

borrowers. We therefore urge that the Department revise § 685.222(b) to grant borrowers a 

defense to repayment if the government agency has secured "any judgment or determination in a 

court of competent jurisdiction or an admission by the school." 

We also recommend that investigations by state agencies and legal aid organizations 

12 685.222(c) &(d). 

13 As noted, presently the Department may collect on federal student loans in perpetuity. 

14 § 685.222(b). 

15  http://www.ed.gov/news/press­releases/fact­sheet­protecting­students­abusive­career­colleges 

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shared with the Department should trigger an automatic review by the Department under § 

685.222(f)(1), followed by a written determination within a reasonable period of time. Litigating 

cases against predatory schools can take years, during which time student borrowers suffer 

greatly. If state agencies can share their investigations with the Department in the manner 

outlined here, the Department can begin making discharge determinations much more quickly. 

Given the role of state regulators and state attorneys general in protecting consumers and 

enforcing state trade practices laws,16  and our recognized role in the "triad" of higher education 

•   17  •   •   oversight,  we believe that this practical change will help streamline and strengthen borrower 

defense implementation. 

Proposed language for § 685.222(f)(1): Upon the written request of a state attorney 

general, state or federal enforcement agency, or a legal aid representative, the Secretary shall 

initiate a process to determine, within a reasonable period of time, whether a group of borrowers 

has a common basis for borrower defense. 

3. Keep state law as a basis for borrower defense 

The Department's proposal preemptively limits the categories of school misconduct that 

would give rise to a defense to repayment by creating a federal standard that excludes applicable 

violations of state law. The proposal limits students' rights to circumstances where a school 

either breached a contract or engaged in "substantial misrepresentations," excluding other 

categories of egregious school misconduct that violate state law. 

Breach of contract and substantial misrepresentation do not capture all the misconduct 

covered by state laws that protect students from exactly the sort of abuse that borrower defense 

seeks to remedy. We are concerned that the Department's proposal to limit viable defenses to 

these two categories would exclude, for example, (a) violations of state law related to 

affirmative­disclosure obligations, debt collection, and per se prohibitions on certain advertising 

techniques, such as the use of government and military seals; (b) "unfair" business acts or 

practices in violation of certain state UDAP laws; (c) violations of other federal laws that are 

incorporated into state law (through, for example, the "unlawful" prong of California's Unfair 

•   •   18  ...  Competition Law  ), such as recruiter incentive­compensation bans; and (d) state­law theories of 

liability predicated on aiding and abetting and conspiracy. 

We do not oppose the creation of a national standard, so long as it serves as a federal 

floor applicable to all borrowers. But to ensure that maximum, long­standing consumer 

16 These statutes generally make unlawful any unfair or deceptive trade  practices as defined by state law.  See, e.g., 

Mass. Gen. Law  c. 93A, § 2 (". .. unfair or deceptive acts or practices in the conduct of any trade or commerce are 

hereby declared unlawful."); 815 111. Comp. Stat. 505/2 (".. .unfair or deceptive acts or practices ... in the conduct 

of any trade or commerce are hereby declared  unlawful whether any person has in fact been misled, deceived or 

damaged thereby.").  Indeed, many trade practices statutes look to the attorneys general not only as the primary 

enforcers of their terms, but also as the regulators who clarify the meaning of their statutory provisions. See, e.g., 

Mass. Gen. Law c. 93A,  §§ 2, 4. 

17 See United States Government Accountability Office, "HIGHER EDUCATION: Education Should Strengthen 

Oversight of Schools and Accreditors; Table I: Oversight Roles and Responsibilities of the 'Triad,'" December 

2014, (available at http://www.gao.gov/assets/670/667690,pdf). 

18 See Cal. Bus. & Profs. Code § 17200 et seq. 

5 
protections remain in place for borrowers, we urge the Department to retain the further 

protections of state law in any new standard.19 

Finally, we ask that the Department clarify in the rules and other communications that 

borrowers with federal consolidation loans, FFEL loans, and Parent PLUS loans are eligible for 

relief based on defense to repayment. Many students who attended Corinthian and other 

predatory schools have FFEL loans or have consolidated their loans since the initial 

disbursement, and these borrowers remain confused regarding their rights to borrower defense 

relief. We appreciate the Department taking this opportunity to make clear that all such 

individuals are eligible for the same relief available to other federal loan borrowers. 

We appreciate the Department's close attention to our recommendations and the 

recommendations of members of the negotiated rulemaking committee and applaud the progress 

we have made together. After years of abuse and deception by predatory for­profit schools, we 

join in the belief that the borrower defense rule will provide a means to help restore 

accountability for taxpayers and fairness for students. We look forward to seeing the product of 

your negotiations this week. 

Sincerely, 

Maura 

Massachusetts Attorney General 

George Jepsen 

Connecticut Attorney General 

Y  V  /  / 

Ramala D. Harris 

California Attorney General 

Douglas S. Chin 

Hawaii Attorney General 

Stephen H. Levins 

Executive Director, 

Hawaii Office of Consumer Protection 

Lisa Madigan 

Illinois Attorney General 

19 Moreover, any perceived burden of interpreting the laws of the various states will not be eased by excluding state 

law.  Under the Department's existing regulations, violations of state law are the only basis for borrower relief. The 

Department's proposed standard that excludes state law will not apply retroactively.  Thus, billions of dollars of 

outstanding federal student loans dispersed before July 2017 will remain subject to a standard for which state law 

remains the only avenue for relief. 

6 
—v 

Andy Beshear 

Kentucky Attorney General 

Janet T. Mills 

Maine Attorney General 

Brian E. Frosh 

Maryland Attorney General 

Lori Swanson 

Minnesota Attorney General 

Hector Balderas 

New Mexico Attorney General 

Roy Cooper 

North Carolina Attorney General 

First Deputy Attorney General Bruce 

Beemer 

Commonwealth of Pennsylvania 

Eric T. Schneiderman 

New York Attorney General 

Ellen F. Rosenblum 

Oregon Attorney General 

Peter F.  Kilmartin 

Rhode Island Attorney General 

Bob Ferguson 

William H. Sorrell  Washington Attorney General 

Vermont Attorney General 

District of Columbia Attorney General 

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