July 6, 2017 / 4:10 PM / 15 days ago

UPDATE 3-Trump administration sued by 18 U.S. states over student loan relief

3 Min Read

(Adds Education Department comment)

By Lisa Lambert

WASHINGTON, July 6 (Reuters) - More than one-third of U.S. states on Thursday sued the U.S. Education Department and Secretary Betsy DeVos over the recent suspension of rules that would have swiftly canceled the student-loan debt of people defrauded by Corinthian Colleges Inc and other for-profit schools.

Last month DeVos pressed pause on the rules, due to take effect on July 1, saying they needed to be reset.

Massachusetts, 17 other states and the District of Columbia said in a filing in U.S. District Court in Washington, D.C. the department broke federal law in announcing the delay with limited public notice and opportunity to comment.

DeVos, a Republican, has said accelerating the debt cancellation process would put taxpayers on the hook for significant costs, and a delay is needed while current litigation in California over the rules works through the legal system.

"With this ideologically driven suit, the state attorneys general are saying to regulate first, and ask the legal questions later," said Education Department Press Secretary Liz Hill in a statement, adding the rules were adopted "through a heavily politicized process."

Consumer groups Public Citizen and Project on Predatory Student Lending sued on Thursday to lift the delay as well.

The rules were finalized in the last days of the administration of President Barack Obama, a Democrat who overhauled federal student lending.

After Corinthian, a for-profit chain, collapsed in 2015 amid government investigations into its post-graduation employment rates, the administration began drafting rules to help students caught with outstanding loans they had taken out for Corinthian tuition.

Wanting to keep students from getting loans they could not repay, Obama specifically targeted for-profit, career colleges that promise students they will find jobs after graduating and can charge high tuition.

The attorneys general for California, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maryland, Minnesota, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia and Washington, all Democrats, also signed onto Thursday's lawsuit.

They said the department and DeVos were using the pending litigation as "a mere pretext" to repeal the rules and replace them with one that "will remove or dilute student rights and protections.”

The $1.4 trillion student-loan industry became a hot-button issue in last year's presidential campaign. Democrats sought to preserve Obama's reforms, while Republicans such as then-candidate President Donald Trump said the government should "get out of the business" of student lending. (Reporting by Lisa Lambert; Editing by Cynthia Osterman and Lisa Shumaker)

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