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DeVos Tells Colleges to Drop Arbitration Agreements

March 18, 2019
 
 

The Department of Education on Friday released new guidance on the 2016 borrower-defense rule instructing colleges to drop enforcement of mandatory arbitration agreements.

Education Secretary Betsy DeVos blocked the rule from taking effect in 2017, but after a legal battle with consumer advocates and several states, she was ordered by a federal court to carry out the rule in October.

The department has made little progress on a backlog of borrower-defense claims from student borrowers who claim they were defrauded or misled by their colleges. But in December, it carried out one part of the rule by canceling $150 million in student loan debt held by borrowers whose colleges closed had closed since November 2013, most of them former Corinthian Colleges students.

The Obama administration rule also barred colleges from enforcing mandatory arbitrary agreements that prevented students from taking their complaints to a court. In the new guidance last week, the Education Department told institutions that they may no longer compel a student to address their complaint through an internal resolution process.

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