Dive Brief:
- DeVry University asked a federal judge Friday to temporarily block the U.S. Department of Education from recouping $23 million in discharged student loans from the online college.
- The Education Department wiped away the debt through the borrower defense to repayment regulations, which allow the agency to forgive student loans for borrowers who have been misled by their colleges.
- The department notified DeVry last August that it sought to recoup the funds used to discharge debt for 649 borrowers. In its latest court filing, Devry argued that “it will suffer irreparable injury in the absence of relief” blocking the recoupment.
Dive Insight:
Early last year, the Education Department announced that it was clearing $71.7 million worth of student loans for people who made borrower defense claims against DeVry. This marked the first time the department granted this type of relief to borrowers who attended an institution that is still operating and accessing federal financial aid.
The borrower defense discharges stem from DeVry advertisements that ran between 2008 and 2015. The Federal Trade Commission accused DeVry of misrepresenting its job and salary outcomes through the ads, leading to a $100 million settlement in 2016. The university also settled with the Education Department around that time, which resulted in stricter agency oversight.
DeVry filed a lawsuit against the Education Department over the recoupment action in October, alleging that the agency had sidestepped regulatory procedures and hadn’t given it due process. In its latest court filing, the university echoed its earlier allegations, contending that the department’s recoupment attempt is unconstitutional.
“The Department has fashioned an elaborate scheme in which the Department has appropriated to itself the power to adjudicate not only borrower defenses to repayment but also recoupment claims against institutions of higher education,” it states.
Meanwhile, the Education Department asked the court in December to dismiss the lawsuit, arguing that DeVry must first go through an ongoing administrative process to challenge the recoupment action.
In these proceedings, a hearing official would issue a decision about whether recoupment is warranted. Afterward, the U.S. education secretary would make a final decision about seeking funds to cover the discharged loans.
Only then could DeVry seek relief in federal district court, the department argued.
DeVry’s request for an injunction comes just as new borrower defense regulations took effect July 1. Those rules, in part, simplify the process for recouping money from colleges once borrower defense claims are approved, according to a fact sheet the Education Department issued in 2022. They apply both to borrower defense applications received on or after July 1, as well as those that were pending on that date.
