July 6, 2020

Debt relief is now harder for students of for-profit colleges

[Cross-posted from The Hill]

By John Patrick Hunt

For-profit colleges are accused of deceiving students across the nation and leaving them with a legacy of student debt. Predatory schools allegedly targeted veterans for their GI benefits and also set their sights on lower-income communities and communities of color.

Now, new, controversial rules will make it more difficult for deceived student borrowers to get relief from their loans. The rules went into effect July 1, after President Trump — ignoring veterans and consumer groups — vetoed a resolution that would have stopped them.

More than 300,000 student borrowers have applied to the Department of Education for loan relief. based on school misconduct. The collapse of large chains of for-profit schools such as Corinthian CollegesITT, and the Art Institutes have highlighted allegations of false job placement statistics, misleading accreditation claims, deceptive claims about financial aid, and costs of attendance, and more.

After years of wrangling, in late 2018 a court ordered into effect rules the Obama administration had drafted to help deceived borrowers. But by that time, the department, now led by Secretary Betsy DeVos, was far along in drafting new rules. 

The DeVos rules make it harder for borrowers to get relief in many ways. One critical change is that the department can no longer handle similar claims in batches, for example providing relief to everyone who entered a program after the school lied about employment statistics. Now each individual borrower is on their own.

Moreover, those individual borrowers now must prove that the school made misrepresentation with the knowledge that it was false or with reckless disregard for the truth. An individual borrower usually will not be able to prove a school’s state of mind — the rules do not say how borrowers can get evidence on the point — so opponents of the new rules have aptly described them as imposing a “near-impossible” standard of proof. 

Although a pending lawsuit challenges the rules, its prospects are uncertain. With the Education Department abdicating its responsibility to protect student borrowers from fraud and deception, it is time to think about consumer bankruptcy as another avenue for relief. 

Despite a perception that it is impossible to escape student loans in bankruptcy, studies have found that 40-60 percent of borrowers who actually seek to do so enjoy at least some success. The main obstacle for the other 40-60 percent is the requirement, unique to student loans, that the borrower show “undue hardship” to get a discharge.

In evaluating undue hardship, courts typically look to factors such as the debtor’s age, health, and family responsibilities, as well as the repayment efforts the debtor has already made. By contrast, courts almost never consider whether the borrower was tricked into taking out the loan in the first place.

It is not entirely clear why this is so. Perhaps it is because courts developed their tests for undue hardship before enrollment at for-profit schools took off. For-profits reportedly have accounted for over 98 percent of higher education fraud complaints.

It is now time for a change. Bankruptcy courts should start to consider whether the school deceived the borrower into enrolling. Dictionaries tell us that the word “undue” means unjustifiably great. As between two borrowers, each of whom will suffer equally in trying to repay student loans, the one who was deceived has a stronger claim that hardship is “undue.”

The federal government makes most student loans, and it might be argued that the government is not responsible for schools’ misconduct. But since 1976, private consumer lenders have been responsible for sellers’ deception if the seller refers the buyer to the lender. Schools do more than “refer” students to federal student loans; they run the entire process of originating the loans under the department’s supervision.

Chapter 7 bankruptcy can affect credit scores, cause social stigma, and require the sale of the debtor’s property. It will not be an attractive option for all victimized borrowers.

However, many deceived borrowers must be in such financial distress that bankruptcy makes sense. Courts can apply bankruptcy law to offer a greater chance of relief than the DeVos rules do. And most importantly, bankruptcy courts can provide relief even if the political process in Washington, D.C is stalled.

Student loans are a source of rising anger and frustration, and loans arising from fraud are among the most infuriating. Bankruptcy courts must step in to help where the education department has failed.

May 19, 2017

Guest Blogging on Concurring Opinions about Whiteness, Class, Rurality

I've been guest blogging for the past few weeks over at Concurring Opinions and invite you over to that blog, on "the law, the universe, and everything" to see what I've been writing.  I've done a four-installment review/commentary on J.D. Vance's Hillbilly Elegy:  A Memoir of a Family and Culture in Crisis.  Spoiler Alert:  I'm not a big fan but, in the end, suggest that the book can help law profs better understand the low-income white students who (thankfully, yes, thankfully!) show up in our classrooms from time to time.  My posts are:

On Donald Trump, J.D. Vance, and the White Working Class

Hillbilly Elegy as Rorschach Test

The "Shock and Awe" Response to Hillbilly Elegy:  Pondering the Role of Race

On Ree Dolly, J.D. Vance and Empathy for Low-Income Whites (or, What Hillbilly Elegy is Good for)

I've also done a bit of writing about rurality, with these posts:

Rurality and Government Retreat

Local Journalism as Antidote to Echo Chambers and Fake News

Also related to rurality are these posts about spatiality and abortion access. 

Did You Hear the One About the Alaska Legislator Who Said ... 

Sanger's Tour de Force on Abortion (with a Blind Spot for Geography)

Carol Sanger of Columbia Law responded to my post about her new book, About Abortion:  Terminating Pregnancy in the 21st Century, here.  I love the fact she says I get the "last word" in our exchange over the significance of geography.

I expect to post another item or two before my term as a guest blogger expires in about a week. 

April 21, 2017

My Testimony before the Assembly Higher Education Committee

Earlier this week, I testified before the California Assembly Higher Education Committee on April 18 in support of Assembly Bill 856, which seeks to diversity faculty and athletic coaches at California universities. These were my remarks.


Thank you, Chair and Members.

My name is Rose Cuison Villazor and I am a Professor of Law at UC Davis.

I have been a law professor for eleven years and I have been teaching at UC Davis for five years. 

As the only Filipino American law professor in a public university and, indeed, the entire state of California, I come before you today in support of AB 856, which would increase faculty diversity at California public Universities and Colleges.

I have seen first hand the need to increase diversity amongst faculty at California schools.

According to the Association of American Colleges and Universities, "Faculty, along with staff, serve as an institution's front-line representatives, and in the academic realm, faculty are also the embodiment of authority on campus. Having a diverse faculty ensures that students see people of color in roles of authority and as role models or mentors. Faculty of color are also more likely than other faculty to include content related to diversity in their curricula and to utilize active learning and student-centered teaching techniques."

A diverse faculty helps close achievement gaps, improves campus climate, and creates new curriculum and research.

Having a faculty reflect the student population benefits students' growth and has a positive impact on their learning experience. 

Currently, in states where affirmative action has been banned, including California, universities have introduced new admissions and financial aid strategies based on socioeconomic status.

Similar initiatives can be applied to the hiring process at California schools.

I thank the author for bringing this measure forward and respectfully ask for your AYE vote.

August 31, 2012

Does the Diversity Justification for Affirmative Action (Mis)Use Minority Students? Reassessing the Supreme Court’s Decision in Grutter

Cross-posted from Justia's Verdict.

The Supreme Court Term that begins in October, like the one that wound down this past June, features some potentially momentous cases. Perhaps the biggest case on the Court’s 2012–13 docket so far is Fisher v. University of Texas, a case in which the Justices will take up once again the extent to which public higher educational institutions can make use of an individual’s race at the admissions stage. (I have written a number of other columns on Fisher, including one viewable here (Part One) and here (Part Two), that provide additional background.)

One big question the Fisher case raises is whether the U.S. Court of Appeals for the Fifth Circuit properly applied the Supreme Court’s 2003 ruling in Grutter v. Bollinger, in which a narrowly divided Court purported to apply strict judicial scrutiny to, but ultimately upheld, the University of Michigan Law School’s use of race alongside many other factors in its admissions process. But in addition to the question whether Grutter was properly applied in Texas is the question some have raised about whether Grutter should itself be overruled. And one challenge to Grutter that I have seen discussed in some recent academic commentary is whether the “diversity” rationale of Grutter—the idea that admitting minority applicants even in part because of their race helps create a better learning environment for nonminority students—problematically uses, instrumentalizes and commodifies minority applicants. In the space below, I take up this idea and offer some responses.

The Foundation of the Constitutional Concept of Educational Diversity: The Bakke Case

To assess the diversity rationale, a good starting point is the Bakke v. Regents of the University of California case from 1978. There, a splintered Supreme Court struck down an affirmative action admissions program undertaken by the medical school at the University of California, Davis, saying that the Davis plan, under which 16 out of 100 entering medical school slots were reserved for members of traditionally underrepresented racial minorities (e.g., Blacks and Latinas/os), violated federal law (either the Equal Protection Clause of the U.S. Constitution, federal statutes that prohibit discrimination on the basis of race, or both.)

Justice Powell wrote a famous opinion (parts of which were joined by other Justices) that controlled the outcome of the Bakke case. In it, Justice Powell said that medical schools (and, by extension, other institutions of higher education) had a legitimate and compelling interest in assembling a student body that was diverse along many lines, including race, but that the Constitution forbade the particular means—racial quotas—that Davis had used to further that interest.

Instead, said Justice Powell, an individual applicant’s minority race can be used as a factor in admissions only when the university also considers a number of diversity aspects other than race, and only when each applicant is compared—taking into account traditional academic strength, the various dimensions along with s/he might add diversity, and other criteria—individually against all other applicants, rather than being evaluated only as against applicants of the same race for a set of pre-designated slots. Justice Powell lauded the racial “plus” plan (which he said was embodied in the way Harvard had structured its admissions system) even as he criticized the quota approach.

Grutter and Gratz: A Supreme Court Majority Embraces Powell’s Approach

In 2003, 25 years after Bakke, the Supreme Court again took up the question of race-conscious affirmative action in higher education, in a pair of cases involving the University of Michigan. In Grutter v. Bollinger, the Justices, by a 5-4 vote, with Justice O’Connor writing for the majority, adopted the approach of Justice Powell in Bakke in upholding the University of Michigan Law School’s race-based affirmative action plan. Whether or not Justice Powell’s view—that racial diversity was a compelling interest that could be permissibly furthered by a narrowly tailored policy that looked at the entirety of the personal and academic attributes of each candidate (including her race) in a system where no slots were reserved for people of particular races—was a “holding” for the Court in 1978, the Court adopted that approach in 2003 in Grutter and made it indisputably the law of the land.

And because, said the Court, the Michigan law school plan at issue in Grutter did not use quotas, but rather took into account race and other characteristics of each applicant in a person-specific and holistic way, the plan survived the “strict scrutiny” that is required under the Constitution for all governmental consideration of an individual’s race. Chief Justice Rehnquist, joined by Justices Scalia, Kennedy, and Thomas, dissented.

In the companion case, Gratz v. Bollinger, the University of Michigan’s undergraduate admissions program, which used race in a more systematic and mechanical way, was struck down by the Court because it operated too much like the forbidden Bakke quota system.

Fisher, the Direct Challenge to Grutter’s Premise it Presents, and a Possible Response

That brings us to Fisher, where one of the questions the Court might take up is whether to retain or overrule Grutter. One line of criticism of Grutter can be found in the recent writings of a venerable constitutional scholar at Vanderbilt Law School, James Blumstein. In some recent scholarship, Professor Blumstein expressed concern over the fact that under the diversity rationale, race-conscious policies are justified “not for the sake of the black and minority students’ own education but largely for the sake of affording educational benefits to others.” In Grutter itself, he points out, the “students who secured the lion’s share of the educational benefits from student body diversity were white students who matriculated to the [Michigan] Law School.” This leads him to suggest that “[w]hatever one might think of group-based racial preferences targeted remedially . . . one should take pause at the non-remedial commodification rationale underlying Grutter. [Grutter] treat[s] minority-student presence as instrumental, a means toward achieving the end of improved quality of education at a public institution of higher learning.”

What are we to make of this? For starters, I should say (and have written) that I lament the doctrinal demise (caused by what I view as intellectual missteps of the Court itself) of the remedial rationale for race-based affirmative action, in favor of an exclusive focus on educational diversity. And I have noted that, technically speaking, the Court has not required that diversity-based affirmative action programs help the admitted minority students in order to survive strict scrutiny. Moreover, race-based commodification, in the form of slavery, remains the single most egregious insult to liberty and justice in American constitutional history.

And yet I am still not as worried by the “commodification/instrumentalization” problem created by the diversity theory as Professor Blumstein appears to be, for three related reasons.

First, it seems to me that university admissions folks instrumentalize or commodify applicants no matter which admissions criteria they employ. If a public college looks only at high school grades and standardized testing scores—and does not consider race or other elements of the whole person—it is doing so at least in part to produce a student body that will make the school look more elite and prestigious in the rankings game and to the outside world. Surely traditional admissions criteria are not designed simply to reward hardworking applicants—use of grades and scores rewards not just hard work but also innate academic aptitude. Nor are colleges that use only “objective” criteria trying simply to identify those applicants who themselves could make the best use of the college’s educational resources; to be sure, the colleges care about the students, but they also care about the short- and long-term success of the colleges themselves. Indeed, it is somewhat ironic that looking at more, rather than fewer, aspects of a candidate’s overall personhood would generate a greater sense of impermissible commodification.

My second response follows closely from my first: Under the diversity rationale that focuses on a number of different kinds of diversity (not racial diversity alone), virtually all admitted students, not just racial-minority students, are in some sense being commodified. The standardized-test whiz, the musician, the computer geek, the older “returning” student, the actor, the farm kid from the underrepresented rural Midwest, the athlete from the big inner-city school, all are being admitted—and I suppose, in some respect, all are being used—by the university to enhance the institution and the educational experience of other students. When commodification/instrumentalization is so broad and pervasive, it loses much of its normative taint under the Constitution—this is why taxes (which instrumentalize all of us) are viewed differently than takings (which make public use only of some of us.)

Finally, we must bear in mind the voluntary nature of participation in an affirmative action program. Minority applicants needn’t choose to attend a school in which their race likely played a factor in their admission; they are free to instead attend a school where their “objective” academic indicators (e.g., prior grades and standardized test scores) place them more comfortably in the mainstream. Because matriculation is voluntary, I think we can infer that the vast majority of minority students who do choose to attend schools where their minority race played an admission role believe that the access to the (presumably) more elite institution outweighs any stigmatic or psychological cost of being “used” for the benefit of other students. In this respect, at least if we are to credit the market-based choices minority applicants make, educational diversity can be seen as “win-win.” In short, the commodification/instrumentalization present in affirmative action seems to me no worse than, and probably much less troubling than, the use that universities make of Division I athletes in exchange for a scholarship and a first-rate education. Certainly, it is nothing like the commodification represented by slavery.

I do have a caveat here, though: If indeed minority students are making choices to attend institutions based on misinformation, or insufficient information, about whether they would be helped or hurt by attending the more elite institution, then that information glitch needs to be addressed for my confidence about the win-win nature of the diversity-based affirmative action to continue. That is why even though I am dubious about many of their substantive hypotheses, I support the efforts of so-called “mismatch” theorists to obtain the best possible information from educational institutions in order to test their claims that minorities would likely be better off if they chose not to attend institutions that made use of their race to admit them. At a minimum, if these claims have merit (and, again, I am far from convinced that they do), then applicants would need to be so informed, so that they could make choices about their own individual circumstances that guarantee that, even if they are being used, they are not being misused.

December 16, 2011

Fisher v. Texas: An Important Affirmative Action Case Pending in the Supreme Court in Which the Challengers May Have Blown It

A pending case that should be of interest to all folks in higher education, and especially those of us who teach law students how to draft pleadings, is Fisher v. University of Texas. The case involves a challenge to the University of Texas’s ability to use race in admissions as part of its affirmative action program, and is now before the U.S. Supreme Court.  I have written two earlier online essays on various aspects of the case for Justia.com; they are viewable here and here.

Whether the Supreme Court can and will take the case is turning out to be a complicated question.  The plaintiff (one of two, but now the only one left) applied to UT as a freshman and was denied admission.   She filed suit in federal court challenging UT's race-based admissions criteria, but at the same time enrolled in another college. In her Complaint (her request for relief), she asked for a declaration that she was entitled to have her UT application considered without regard to race, an injunction (a court order) directing UT to consider admitting her without regard to race (on the premise that she would transfer to UT), and money damages "in the form of" a refund of her admissions application fee (on the theory that her application had not been processed fairly, so that she was entitled to her money back.)

She lost in the trial court, and then twice in the Fifth Circuit Court of Appeals, first in front of a three-judge panel in January 2011, and then this past summer when she (unsuccessfully) asked the Fifth Circuit as a whole (en banc) to review her case.  She then made a request for Supreme Court review.

But here's the (or at least a) big wrinkle.  Since it took a while for her case to be resolved by the Fifth Circuit, she's no longer interested in transferring to UT (she's already a senior at her college).  So her claims for declaratory and injunctive relief are no longer live; in legal parlance they are moot.  But what about her small monetary refund claim (around $100)?

In opposing Supreme Court review last week, UT told the Court that if the Court grants review, UT will offer to refund plaintiff the $100, thereby mooting the damage claim too!  So, argues UT, it would be a waste of time for the Court to grant review, only to have to dismiss the case before deciding it.

A very interesting argument.  There is no clear Supreme Court authority that UT cites that says a mere offer to give a plaintiff what she seeks will moot a case at a late date even if the plaintiff turns the offer down.  In other words, UT cites no case that says mere "tender" by a defendant is enough to moot a damage claim late in the day.  (And it is somewhat odd that UT, if it feels this way, didn't make a "tender" earlier this year when plaintiffs sought en banc review in the Fifth Circuit; the injunctive claims were moot then too, since plaintiffs were already in their junior years and would no longer be interested in transfer.  Also, it is interesting that UT says it will tender if review is granted, rather than simply making the tender right now.)

Nonetheless, as a matter of mootness logic, the tender argument has some force.  If a defendant is willing to give the plaintiff all she currently asks for, why should a court still have the power to step in?

One possible response for plaintiff would be to say she now wants to amend the Complaint to add additional damages for not having been able to attend UT (lost earnings due to a slightly inferior education, etc.).  After all, she might say, the fact that she asked for an injunction shows that what she wanted all along was the value of the UT experience, and if she can no longer get that in-kind, money damages are the next best thing.

All that may be true, but the district court (where such decisions must be made) has not yet permitted her to amend the Complaint to add damages in light of UT's promised tender.  As the case exists before the Supreme Court (and as the Court observed in a decision two years ago, Alvarez), the Complaint is unamended and therefore arguably moot.  (Maybe Alvarez is different because there the original Complaint sought no damages, whereas here it sought small but now insufficient damages.  But should that make a difference?)

Or perhaps plaintiff can argue that the catchall "all other relief [the] [c]ourt finds appropriate and just" language at the end of her Complaint can be read to include additional damages beyond a refund.  But I don't know that such boilerplate language (that exists in virtually all complaints) can do the work.  If it could, then virtually no case could ever become moot, because some, unspecified, damages are always conceivable even if they are not requested.

We'll see what happens.  I won't be too surprised either way the Court goes; if it wants to use this case to revisit whether race can be used in higher education admissions (which it last addressed in 2003 in cased involving the University of Michigan), it might be able to find a way.  But it won't be easy.

In the meantime, I hope we can all agree that plaintiffs' Complaint should have been written so as not to limit the damages to a refund, but rather to include the value of a UT education should injunctive relief not be granted.  Instead of saying damages "in the form of" a refund, the Complaint should and could have said damages "including but not limited to" a refund . . .   Those five words should be the first ones taught in law school.