Dive Brief:
- An administrative law judge has temporarily blocked the U.S. Department of Education from recouping over $23 million in discharged student loans from DeVry University, a for-profit college.
- Robert Layton, administrative law judge at the Education Department’s Office of Hearings and Appeals, granted DeVry’s request last month to pause the recoupment.
- The Education Department has tried to regain the money under the borrower defense to repayment regulation, which authorizes loan cancellation for students defrauded by their colleges. Layton’s order cited a separate legal challenge against the department’s newest version of these regulations that temporarily blocked them from taking effect.
Dive Insight:
On Sunday, an Education Department spokesperson said the agency has requested reconsideration of the decision temporarily blocking the recoupment.
"However, the pause of the recoupment proceeding does not impact other potential recoupment actions," the spokesperson said.
The recoupment stems from the Education Department’s 2022 decision to clear up to $71.7 million of student loans for people who made borrower defense claims against DeVry.
The move was a turning point for the department — it marked the first time the agency had granted this type of relief to students who attended an institution that is still open and accessing Title IV federal financial aid.
Since then, the Education Department has taken similar actions against colleges that are still operating.
Earlier this year, it granted borrower defense relief to students who attended the University of Phoenix and Ashford University, which was rebranded as the University of Arizona Global Campus after the University of Arizona acquired it in late 2020. The department has said it would also seek recoupment from those two institutions.
DeVry sued the Education Department in late 2022 over the recoupment attempt.
The university has argued that the department has unlawfully created an administrative scheme to adjudicate borrower defense cases and recoupment claims.
“The Department’s creation of this scheme through regulations that purport to have the force of law is therefore an unconstitutional exercise of legislative power,” it said in June court documents.
The borrower defense rules are facing other legal challenges. In August, a federal appeals court temporarily blocked the Biden administration’s newest rules governing the program.
Career Colleges & Schools of Texas, which represents for-profit institutions in the state, brought the lawsuit.
It has argued the new regulations attempt to carry out massive loan forgiveness while making colleges responsible for the cost. The group contends the Education Department doesn’t have congressional permission to seek discharged loan costs from colleges.
The Education Department’s Office of Hearings and Appeals previously rejected DeVry’s request to pause the recoupment. But Layton reversed that decision on Oct. 17, ruling the arguments Career Colleges & Schools of Texas made “call into question several relevant issues.”
Editor's note: This story has been updated with a comment from the Education Department.
