Dive Brief:
- DeVry University, a for-profit college, filed a lawsuit Tuesday to stop the U.S. Department of Education from recouping tens of millions of dollars from the institution to finance loan discharges for past students.
- In August, the Education Department notified DeVry that it intended to recoup more than $23 million to pay for discharged debt on behalf of 649 borrowers who previously attended the university. The former students filed claims under the borrower defense to repayment regulation, which allows debts to be forgiven for students defrauded by their college.
- DeVry contends that the Education Department didn’t afford the university due process and skirted proper regulatory procedures. The lawsuit, filed in the U.S. District Court for the Northern District of Illinois, is asking a judge to rule that the department’s actions are unlawful, block the agency from recouping the sum from DeVry, and grant the university reasonable attorney’s fees and expenses.
Dive Brief:
The lawsuit stems from advertisements that DeVry ran between 2008 and 2015. The Federal Trade Commission accused the university of misleading students about the university’s job and salary outcomes, leading DeVry to settle with the agency for $100 million in 2016. These allegations also led to stricter oversight from the Education Department.
In February, around six years after the settlement, the Education Department announced it would cancel $71.7 million from former DeVry students who made borrower defense claims. The action marked the first time the department granted this type of relief to students who attended an institution that is still open and continues to access federal financial aid.
The Education Department also announced it would attempt to recoup discharge costs from DeVry. That request came in August, and it was based on ads that had stopped running in 2015, according to DeVry’s lawsuit.
DeVry argues the recoupment attempt is unlawful. For one thing, according to the university, the department did not say whether it looked at the individual details of each case. Instead, the lawsuit says the Education Department adjudicated the applications as a single group and argued that “there is no lawful basis for such an act.”
“The Department cannot circumvent controlling regulations or suspend due process because the volume of claims is large,” the lawsuit argues. “The Department turned the process on its head by requiring DeVry to sort it out, without providing the information DeVry needs to do so.”
The Education Department did not immediately respond to a request for comment.
DeVry alleges the Education Department has violated regulations, such as by failing to notify the university about borrower defense applications. It says the agency must provide it with basic information, including about the students’ attendance and their allegations against the university.
The university also questioned why the department is holding DeVry responsible for claims from students who received funds from the 2016 settlement.
In a statement, DeVry warned the department’s actions could soon affect other colleges.
“The Department’s attempt to recoup funds from a currently operating institution, and extra-regulatory approach in doing so, will set a dangerous precedent that could profoundly impact every institution that participates in the Federal Student Aid programs,” it said.
