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NSLDN Sues Secretary DeVos to Force Release of Letters of Credit Held by the Department.

Secretary DeVos refuses to release critical information regarding her likely proposal to eliminate taxpayer protections

WASHINGTON, D.C. (July 16, 2018) – Today, the National Student Legal Defense Network(NSLDN) filed a complaint in the United States District Court for the District of Columbia, seeking a Court order that would require Secretary of Education Betsy DeVos to release information about the circumstances under which institutions of higher education are required to provide financial guarantees to the government. Such guarantees protect taxpayers from financial risks associated with predatory student lending practices.

Title IV of the Higher Education Act (“HEA”) mandates that institutions providing students with access to federal student financial aid programs, such as Pell Grants or Federal Direct Loans, demonstrate their financial responsibility. If an institution cannot meet the general financial responsibility standards, the institution may be permitted to continue participating in these federal programs if it first provides the U.S. Department of Education with a financial “letter of credit.” A letter of credit acts as an insurance policy against future potential losses by the federal treasury, such as those forced by school closures or students having loans forgiven.

Since taking office, Secretary DeVos has delayed—and is now rewriting as part of the Borrower Defense and Financial Responsibility rulemaking—regulations designed, first and foremost, to protect taxpayers from these kinds of financial losses. The Department has stated that new regulations will be released by November 1, 2018, meaning that a proposed rule and comment period is rapidly approaching. For this reason, NSLDN has been diligently trying to understand the basis by which the Department has required institutions to post letters of credit in the past. Secretary DeVos steadfastly refuses, however, to produce the documents that will permit the public to understand the Department’s current practices.

“Secretary DeVos is rewriting the rules that define what it means for an institution to be financially responsible and a fiduciary of taxpayer funds. We are concerned that in her forthcoming proposal, she will, once again, put the interest of predatory and financially unstable institutions ahead of the interests of the American taxpayer,” said NSLDN President Aaron Ament. “The Administration is hiding the most obvious information that one would need in order to analyze any proposed changes to the regulations. It is incomprehensible that Secretary DeVos would propose new standards without first analyzing this information. Without access to these materials, we can only assume that her proposal will be a complete giveaway to for-profit institutions.”

NSLDN’s lawsuit seeks both the release of all letters of credit currently held by the Department, as well as any communications between the Department and institutions of higher education demanding letters of credit.

The complaint is available here.

The FOIA request is available here.

Tags   Litigation