JOSEPH H. HUNT DAVID L. ANDERSON MARCIA BERMAN€¦ · Administrative Record Index No....

Notice of Lodging of Certified Administrative Record No. 3:19-cv-03674-WHA

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JOSEPH H. HUNT Assistant Attorney General DAVID L. ANDERSON United States Attorney MARCIA BERMAN Assistant Branch Director KATHRYN C. DAVIS R. CHARLIE MERRITT KEVIN P. HANCOCK Trial Attorneys Civil Division, Federal Programs Branch U.S. Department of Justice 919 East Main Street, Suite 1900 Richmond, VA 23219 Telephone: (202) 616-8098 Fax: (804) 819-7417 E-mail: [email protected] Attorneys for Defendants

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

THERESA SWEET, et al.,

Plaintiffs,

v.

ELISABETH DEVOS, in her official capacity as Secretary of Education, and the UNITED STATES DEPARTMENT OF EDUCATION

Defendants.

No. 3:19-cv-03674-WHA NOTICE OF LODGING OF CERTIFIED ADMINISTRATIVE RECORD

Case 3:19-cv-03674-WHA Document 56 Filed 11/14/19 Page 1 of 2

Notice of Lodging of Certified Administrative Record No. 3:19-cv-03674-WHA

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Pursuant to this Court’s October 3, 2019 Order, ECF No. 44, Defendants hereby file the

Administrative Record in the above-referenced case. An index and certification for the

Administrative Record are attached along with the record itself.

Dated: November 14, 2019 Respectfully submitted,

JOSEPH H. HUNT Assistant Attorney General MARCIA BERMAN Assistant Branch Director /s/ R. Charlie Merritt KATHRYN C. DAVIS R. CHARLIE MERRITT (VA Bar # 89400) KEVIN P. HANCOCK Trial Attorneys Civil Division, Federal Programs Branch U.S. Department of Justice 919 East Main Street, Suite 1900 Richmond, VA 23219 Telephone: (202) 616-8098 Fax: (804) 819-7417 E-mail: [email protected] Attorneys for Defendants

Case 3:19-cv-03674-WHA Document 56 Filed 11/14/19 Page 2 of 2

Case 3:19-cv-03674-WHA Document 56-1 Filed 11/14/19 Page 1 of 2

Administrative Record Index No. 3:19-cv-03674-WHA

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JOSEPH H. HUNT Assistant Attorney General DAVID L. ANDERSON United States Attorney MARCIA BERMAN Assistant Branch Director KATHRYN C. DAVIS R. CHARLIE MERRITT KEVIN P. HANCOCK Trial Attorneys Civil Division, Federal Programs Branch U.S. Department of Justice 919 East Main Street, Suite 1900 Richmond, VA 23219 Telephone: (202) 616-8098 Fax: (804) 819-7417 E-mail: [email protected] Attorneys for Defendants

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

THERESA SWEET, et al.,

Plaintiffs,

v.

ELISABETH DEVOS, in her official capacity as Secretary of Education, and the UNITED STATES DEPARTMENT OF EDUCATION

Defendants.

No. 3:19-cv-03674-WHA ADMINISTRATIVE RECORD INDEX



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Administrative Record Index

Declaration of Diane Jones dated November 14, 2019………………………………………...1

Exh. 1: Bauer v. DeVos, 325 F. Supp. 3d 74; Bauer v. DeVos, 332 F. Supp. 3d 181…………..13

Exh. 2: CAPPS v. DeVos, 344 F. Supp. 3d 158………………………………………………....46

Exh. 3: Electronic Announcement on effective date of 2016 regulations………………………67

Exh. 4: Federal Register Notice of the effective date of 2016 regulations……………………...78

Exh. 5: Final regulations on Borrower Defense…………………………………………………81

Declaration of Ian Foss dated November 14, 2019……………………………………….….320

Exh. A: ONR – 2016 Rules…………………………………………………………………….325

Exh. B: Change Request – 2016 Rules………………………………………………………...328

Declaration of Colleen Nevin dated November 14, 2019………………………………...….336

Exh. 1: Federal Register Notice of March 19, 2019……………..…………………………….354

Exh. 2: Special Master report 1…………………………………………………………….….357

Exh. 3: Special Master report 2…………………………………………………………….….368

Exh. 4: Special Master report 3………………………………………………………………..375

Exh. 5: Special Master report 4………………………………………………………….…….384

Exh. 6: Borrower Defense Unit report dated October, 2016……………………………...…..392

Exh. 7: Combined Borrower Defense Unit quarterly reports (5)………………………….…..397

Exh. 8: Announcement of creation of Enforcement Unit……………………………………...405

Exh. 9: Posting for Borrower Defense Unit attorney positions ………………………………407

Exh. 10: Announcement for posting at law schools…………………………………..……….416

Exh. 11: June 8, 2015 Announcement……………………………...………………………….417

Exh. 12: Heald Job Placement Rates Attestation Forms………………………....…………….425

Exh. 13: Everest/WyoTech Job Placement Rates Attestation Forms………………………….438

Exh. 14: Universal Borrower Defense Form…………………………………….…………….454

Exh. 15: Protocols (JPR Instructions)…………………………………………….……………478



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Exh. 16: CCI Non-JPR Review Protocol……………………………………….……………..489

Exh. 17: Protocols (ITT Employment Prospects)…………………………………..…………493

Exh. 18: Standard Protocol…………………………………………………………………….494

Exh. 19: Office of Inspector General Report……………………………….…………………496

Exh. 20: Corinthian Colleges Inc. Relief Memo………………………………….…………..538


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EXHIBIT 1


Bauer v. DeVos, 325 F.Supp.3d 74 (2018)358 Ed. Law Rep. 368

© 2019 Thomson Reuters. No claim to original U.S. Government Works. 1

325 F.Supp.3d 74United States District Court, District of Columbia.

Meaghan BAUER, et al., Plaintiffs,v.

Elisabeth DEVOS, Secretary, U.S.Department of Education, et al., Defendants.

Civil Action No. 17-1330 (RDM)|

Signed 09/12/2018

SynopsisBackground: Students, coalition of states, and District ofColumbia brought suit against Department of Education,challenging agency actions delaying implementation ofBorrower Defense Regulations. Parties moved for summaryjudgment.

Holdings: The District Court, Randolph D. Moss, J., heldthat:

[1] students had standing to challenge Department's actions;

[2] Department lacked good cause to dispense with negotiatedrulemaking; and

[3] Department acted arbitrarily and capriciously in stayingimplementation of Regulations pending judicial review.

Plaintiffs' motions for summary judgment granted;defendant's motion for summary judgment denied.

West Headnotes (30)

[1] Federal CourtsRights and interests at stake; adverseness

Federal courts may only adjudicate thosedisputes in which the plaintiff has a personalstake in the outcome of the controversy sufficientto warrant his invocation of federal-courtjurisdiction. U.S. Const. art. 3, § 2.

[2] Federal Civil ProcedureIn general; injury or interest

Federal Civil ProcedureCausation; redressability

The plaintiff bears the burden of establishingstanding, and, accordingly, must make a showingof injury-in-fact, causation, and redressability.


Injury in fact, which is a requirement of standing,requires an invasion of a legally protectedinterest which is (a) concrete and particularized,and (b) actual or imminent, not conjectural orhypothetical.

[4] Federal Civil ProcedureCausation; redressability

Causation, which is a requirement of standing,requires proof of a causal connection betweenthe injury and the conduct complained of—theinjury has to be fairly traceable to the challengedaction of the defendant, and not the result of theindependent action of some third party not beforethe court.

[5] Federal Civil ProcedureCausation; redressability

Redressability, which is a requirement ofstanding, requires a substantial likelihood thatthe requested relief will remedy the allegedinjury in fact.


For each claim, if constitutional and prudentialstanding can be shown for at least one plaintiff,the court need not consider the standing of theother plaintiffs to raise that claim.

[7] Education

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Federally guaranteed loans

Students who attended for-profit college hadstanding to challenge decision of Department ofEducation delaying implementation of BorrowerDefense Regulations, which were regulatorychanges to federal student loan programsdesigned to protect student loan borrowers frommisleading, deceitful, and predatory practices;Regulations would have prohibited school fromkeeping students from banding together withother alleged victims of school's fraud to bringsuit in state court, and Regulations wouldhave provided students with significant newprotections in adjudication of their borrowerdefense applications.

[8] CourtsPrevious Decisions as Controlling or as

Precedents

A district court must follow controllingprecedent until it has been overruled by a courtempowered to do so.

[9] Federal CourtsJurisdiction, Powers, and Authority in

General

Federal CourtsInception and duration of dispute;

recurrence; "capable of repetition yet evadingreview"

Federal courts must ensure not only that theyhave Article III jurisdiction at the outset ofa case, but also that the parties' dispute—or“controversy”—remains live at all stages ofreview. U.S. Const. Art. 3.

[10] EducationFederally guaranteed loans

Students' challenges to decision of Departmentof Education delaying implementation ofBorrower Defense Regulations, which wereregulatory changes to federal student loanprograms designed to protect student loanborrowers from misleading, deceitful, andpredatory practices, were not moot, even

though date until which Department haddelayed regulations had passed; Department'sinterpretation of provision under which it haddelayed implementation had carried through toregulation that subsequently remained operativeand was causing students a cognizable injury.

1 Cases that cite this headnote

[11] Administrative Law and ProcedurePlain, literal, or clear meaning; ambiguity

or silence

Agency interpretations of a statute are notentitled to deference where the intent ofCongress is clear.

[12] Administrative Law and ProcedureDeference to Agency in General

An agency is entitled to Chevron deference onlywhen the agency believes that it is exercisingsome form of administrative discretion.


The Higher Education Act's (HEA) mastercalendar provision does not require that all newregulations under the HEA take effect on July 1.20 U.S.C.A. § 1089(c)(1).


Department of Education lacked good causeto dispense with negotiated rulemakingunder Higher Education Act (HEA) indelaying implementation of Borrower DefenseRegulations, which were regulatory changesto federal student loan programs designed toprotect student loan borrowers from misleading,deceitful, and predatory practices; Department'snotice of proposed rulemaking said nothingabout whether Department could have includednegotiated rulemaking with respect to delayrule, notice did not identify any emergency orserious harm that would result absent waiver,and Department provided no example of cost

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Department arguably avoided by dispensing withrequirement. 20 U.S.C.A. § 1098a(b)(2).


[15] Administrative Law and ProcedureParticular Agency Actions or Failures to

Act

Stays under the provision of AdministrativeProcedure Act (APA) permitting an agency topostpone the effective date of an action pendingjudicial review are subject to judicial review. 5U.S.C.A. § 705.


[16] Administrative Law and ProcedureMeaningful standard for review

When a statute is drawn so that a court wouldhave no meaningful standard against which tojudge the agency's exercise of discretion, theagency's action taken pursuant to that statute isunreviewable.


An action is “committed to agency discretion”and is thus not reviewable if the relevant statute isdrawn so that a court would have no meaningfulstandard against which to judge the agency'sexercise of discretion. 5 U.S.C.A. § 701(a).



If a statute fails to set a meaningful standard,then there is no basis for a court to conclude thatthe challenged agency action was unlawful or anabuse of discretion. 5 U.S.C.A. § 701(a).

[19] Administrative Law and ProcedurePresumptions as to Reviewability

Except in cases involving enforcement decisions,allocation of lump sum appropriations, or

other categories of administrative decisions thatcourts traditionally have regarded as committedto agency discretion, courts must apply apresumption in favor of judicial review. 5U.S.C.A. § 701(a).


[20] Administrative Law and ProcedureProcedure in General

Absent good cause, courts must avoid engraftingtheir own notions of proper procedures uponagencies.

[21] Administrative Law and ProcedureSupersedeas or stay of proceedings

To justify a stay under the provision of theAdministrative Procedure Act (APA) permittingan agency to postpone the effective date of anaction pending judicial review, even though anagency need not apply the same canonical four-factor test that courts do, it must weigh thesame equities; this includes, but is not limitedto, balancing the competing claims of injury,considering the effect on each party of grantingthe stay, and paying particular regard for thepublic consequences. 5 U.S.C.A. § 705.


At a minimum, to justify a stay under theprovision of the Administrative Procedure Act(APA) permitting an agency to postpone theeffective date of an action pending judicialreview, an agency must provide a reasonedexplanation that is sufficient to enable courts toevaluate whether a stay was required to affordparties an adequate judicial remedy—that is, toensure that the prevailing party in the pendinglitigation would ultimately obtain meaningfulrelief. 5 U.S.C.A. § 705.



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An agency stay under the provision of theAdministrative Procedure Act (APA) permittingan agency to postpone the effective date ofan action pending judicial review should beimposed for one—and only one—reason: tomaintain the status quo in order to allow judicialreview of the underlying regulation to proceed ina just manner. 5 U.S.C.A. § 705.


To justify a stay under the provision of theAdministrative Procedure Act (APA) permittingan agency to postpone the effective date ofan action pending judicial review, an agencymust do more than pay lip service to thepending litigation, or merely assert, withoutany specificity, that the litigation raises seriousquestions concerning the validity of certainprovisions of the rule. 5 U.S.C.A. § 705.


To justify a stay under the provision of theAdministrative Procedure Act (APA) permittingan agency to postpone the effective date ofan action pending judicial review, although theagency need not adhere to the specific contoursof the four-factor preliminary injunction test,it must weigh the same kinds of equitableconsiderations that courts have long appliedand must explain why, in light of the pendinglitigation, a stay is required to ensure the partieswill ultimately obtain an adequate and justjudicial remedy. 5 U.S.C.A. § 705.


Department of Education acted arbitrarilyand capriciously in staying, pending judicialreview, implementation of Borrower DefenseRegulations, which were regulatory changesto federal student loan programs designed toprotect student loan borrowers from misleading,deceitful, and predatory practices; fact that

parties would avoid costs of complying withexisting regulations was insufficient to supportstay, and Department's position that regulationswere legally questionable was at odds withposition it took when it promulgated BorrowerDefense Regulations. 5 U.S.C.A. § 705.



The mere fact that parties would avoid the costsof complying with the existing regulations isinsufficient to support a stay under the provisionof the Administrative Procedure Act (APA)permitting an agency to postpone the effectivedate of an action pending judicial review. 5U.S.C.A. § 705.


[28] Administrative Law and ProcedureReview for arbitrary, capricious,

unreasonable, or illegal actions in general

The “arbitrary and capricious” standardof review of agency actions under theAdministrative Procedure Act (APA) requiresthat agencies provide an explanation that willenable the court to evaluate the agency's rationaleat the time of decision. 5 U.S.C.A. § 701(a).



To justify a stay under the provision of theAdministrative Procedure Act (APA) permittingan agency to postpone the effective date of anaction pending judicial review, an agency mustdo more than simply assert—without elaboration—that the litigation raises unspecified seriousquestions for resolution and that a stay willsave regulated parties the cost of compliance. 5U.S.C.A. § 705.


[30] Administrative Law and Procedure

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Explanation or reasons for change

An agency is entitled to change its position, and,to do so, it need not even demonstrate that itscurrent view is better than its old one, but anunacknowledged and unexplained inconsistencyis the hallmark of arbitrary and capriciousdecision-making. 5 U.S.C.A. § 701(a).


Attorneys and Law Firms

*78 Adam R. Pulver, Scott Lawrence Nelson, JulieA. Murray, Public Citizen Litigation Group, BenjaminMichael Wiseman, Office of the Attorney General Officeof Consumer Protection, Washington, DC, Toby R. Merrill,Legal Services Center of Harvard Law School, JamaicaPlain, MA, Yael Shavit, Office of the Attorney General ofMassachusetts, Boston, MA, Bernard Ardavan Eskandari,California Department of Justice, Los Angeles, CA, JohnA.B. Langmaid, Joseph J Chambers, Office of AttorneyGeneral, Hartford, CT, Christian Douglas Wright, DelawareDepartment of Justice, Wilmington, DE, Mark StanleyKubiak, Office of the Attorney General of Virginia ConsumerProtection Section, Samuel Thurston Towell, Office ofthe Attorney General of Virginia, Richmond, VA, BryanChien Yee, James Collington Paige, Thomas Francis ManaMoriarty, State of Hawaii Department of the AttorneyGeneral, Honolulu, HI, Joseph Michael Sanders, IllinoisAttorney General's Office, Chicago, IL, Jessica Whitney,Iowa Attorney General's Office, Des Moines, IA, ChristopherJohn Madaio, Office of the Attorney General of Maryland,Baltimore, MD, Jason Timothy Pleggenkuhle, MinnesotaAttorney General's Office, St. Paul, MN, Carolyn Fast, JaneMelissa Azia, Office of the New York Attorney General,New York, NY, Matthew Liles, North Carolina Department ofJustice, Raleigh, NC, Andrew U. Shull, Oregon Departmentof Justice, Salem, OR, Jesse Harvey, Pennsylvania Officeof the Attorney General Bureau of Consumer Protection,Pittsburg, PA, John M. Abel, Office of Attorney General,Harrisburg, PA, Michael John Fischer, Pennsylvania Officeof Attorney General, Philadelphia, PA, Edmund FrancisMurray, Jr., Neil F. X. Kelly, Rhode Island Department ofAttorney General, Providence, RI, Christopher James Curtis,Office of the Attorney General, State of Vermont, Montpelier,VT, Benjamin Jerauld Roesch, Washington State AttorneyGeneral's Office, Seattle, WA, for Plaintiffs.

Karen Bloom, Robert Charles Merritt, U.S. Department ofJustice, Washington, DC, for Defendants.

MEMORANDUM OPINION AND ORDER

RANDOLPH D. MOSS, United States District Judge

Meaghan Bauer, Stephano Del Rose, and a coalition ofnineteen states and the District of Columbia bring suit againstthe Department of Education under the AdministrativeProcedure Act (“APA”), 5 U.S.C. § 701 et seq. Plaintiffschallenge three agency actions delaying the implementationof the “Borrower Defense Regulations,” a package ofregulatory changes to federal student loan programs designedto “protect student loan borrowers from misleading, deceitful,and predatory practices.” William D. Ford Federal DirectLoan Program (“Borrower Defense Regulations”), 81 Fed.Reg. 75,926, 75,926 (Nov. 1, 2016). The Borrower DefenseRegulations *79 were published on November 1, 2016,and were to become effective on July 1, 2017. Shortlybefore the effective date, however, the California Associationof Private Postsecondary Schools (“CAPPS”), brought suitchallenging the regulations, and, a week later, CAPPS soughta preliminary injunction blocking the implementation of twochanges. That motion was never fully briefed or decidedbecause the Department, on its own accord, issued a stayunder § 705 of the APA (“Section 705 Stay”), postponingnot only the effective date of the two changes that CAPPShad asked the Court preliminarily to enjoin, but most of theother portions of the regulations as well. While the CAPPSlitigation continued, the Department issued an interim finalrule on October 24, 2017 that delayed the effective date of theBorrower Defense Regulations to July 1, 2018, and a noticeof proposed rulemaking to further delay the effective date toJuly 1, 2019. Then, on February 14, 2018, the Departmentissued a final rule delaying the effective date of the BorrowerDefense Regulations until July 1, 2019.

Within weeks of the issuance of the Section 705 Stay, Bauerand Del Rose (student borrowers who allege that they wouldbenefit from the Borrower Defense Regulations) and thecoalition of nineteen states and the District of Columbia filedseparate suits seeking to invalidate the stay. Over the courseof the last year, both sets of plaintiffs have amended theircomplaints to challenge the additional delay actions takenin October 2017 and February 2018. On March 1, 2018,the Court consolidated the student borrower and state cases,

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stayed the CAPPS case pending resolution of this case, andordered a final round of summary judgment briefing.

The matter is now before the Court on cross-motions forsummary judgment filed by the state plaintiffs, Dkt. 55, thestudent borrower plaintiffs, Dkt. 56, and the Department, Dkt.58; Dkt. 59. In brief, the Court concludes that Plaintiffs havestanding to challenge the delay actions; that the October 24,2017 Interim Final Rule is based on an unlawful constructionof the Higher Education Act of 1965; that the February14, 2018 Final Delay Rule is procedurally invalid; thatthe Section 705 Stay is judicially reviewable; and that theDepartment's Section 705 Stay is arbitrary and capricious.The Court, accordingly, will GRANT the state plaintiffs'and the student borrower plaintiffs' motions for summaryjudgment, Dkt. 55; Dkt. 56, and will DENY the Department'scross-motion, Dkt. 66. Before entering a remedial decree, theCourt will order the parties in this case and the parties andproposed intervenors in CAPPS v. DeVos, Civil Action No.17-999, to appear for a status conference on September 14,2018, at 10:30 a.m. in Courtroom 21.

I. BACKGROUND

A. Borrower Defense RegulationsTitle IV of the Higher Education Act of 1965 (“HEA”),20 U.S.C. § 1070 et seq., empowers the Secretary ofEducation “to assist in making available the benefits ofpostsecondary education to eligible students ... in institutionsof higher education” through various types of financial aid.Id. § 1070(a). The William D. Ford Federal Direct LoanProgram (“Direct Loan Program”) allows students who attend“participating institutions of higher education” to obtaindirect loans from the federal government to pay for theireducational expenses. Id. § 1087a(a). Those institutionsof higher education that are selected to participate in theDirect Loan Program must enter into an agreement with theSecretary of Education, which may include any provisions“the Secretary determines are necessary to protect the *80interests of the United States and to promote the purposesof” the Direct Loan Program. Id. § 1087d(a)(6); see also id.§ 1087c. Moreover, and more generally, the Secretary hasauthority “to make, promulgate, issue, rescind, and amendrules and regulations governing the” Direct Loan Program.Id. § 1221e-3. In administering the Direct Loan Program,the Secretary must also “specify in regulations which acts oromissions of an institution of higher education a borrower

may assert as a defense to repayment of a loan” made underthe Direct Loan Program. Id. § 1087e(h).

Pursuant to these authorities, in January 1994, the Secretaryissued “standards, criteria, and procedures governing theFederal Direct Student Loan ... program.” Federal DirectStudent Loan Program, 59 Fed. Reg. 472, 472 (Jan. 4, 1994).Those standards included the first iteration of the borrowerdefense rule, which permitted a Direct Loan Programborrower to “assert as a defense against the repayment of theloan a claim based on the act or omission of the school” if(1) that act or omission gave rise to a cause of action againstthe school under state law, (2) the borrower presented the“claim to the school and received no satisfaction,” and (3)the borrower filed a timely claim with the Department ofEducation. Id. at 481.

In December 1994, the Secretary amended the Direct LoanProgram regulations, including those governing borrowerdefenses. See William D. Ford Federal Direct Loan Program,59 Fed. Reg. 61,664, 61,696 (Dec. 1, 1994). Under the newregulations—which remain in effect today—borrowers arepermitted to assert “as a defense against repayment, anyact or omission of the school attended by the [borrower]that would give rise to a cause of action against the schoolunder applicable State law.” 34 C.F.R. § 685.206(c)(1)(2016). If that defense to “repayment is successful, theSecretary notifies the borrower that the borrower is relievedof the obligation to repay all or part of the loan,” and theSecretary may provide the borrower with further relief asappropriate. Id. § 685.206(c)(2). The Secretary may thenbring a “proceeding to require the school whose act oromission resulted in the borrower's successful defense againstrepayment of [the] Direct Loan to pay to the Secretarythe amount of the loan to which the defense applies.” Id.§ 685.206(c)(3). In short, the 1994 borrower defense rulepermits a student borrower to assert his or her school'smisconduct as a reason for nonrepayment, and, if successful,the regulation shifts the obligation to repay the loan from theborrower to the school.

The adequacy of the 1994 borrower defense rule was testedby “the collapse of Corinthian Colleges (Corinthian)” in May2015. William D. Ford Federal Direct Loan Program (“June16, 2016 Notice of Proposed Rulemaking (‘NPRM’)”),81 Fed. Reg. 39,330, 39,330 (June 16, 2016). Corinthianwas “a publicly traded company [that] operat[ed] numerouspostsecondary schools that enrolled over 70,000 students atmore than 100 campuses nationwide.” Id. at 39,335. After

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Corinthian “filed for bankruptcy” and the Department found“that the college had misrepresented its job placement rates,”the Department “received thousands of claims for studentloan relief from Corinthian students.” Id. In dealing with theaftermath, the Department concluded that the 1994 borrowerdefense rule was outdated and was no longer adequate to dealwith the changed “landscape of higher education.” Id.

To address these perceived deficiencies, the Departmentcommenced a rulemaking. First, pursuant to its obligationsunder the HEA, it “obtain[ed] the advice of andrecommendations *81 from individuals and representativesof the groups involved in student financial assistanceprograms under [Title IV of the HEA], such as students,legal assistance organizations that represent students,institutions of higher education, State student grantagencies, guaranty agencies, lenders, secondary markets,loan servicers, guaranty agency servicers, and collectionagencies.” 20 U.S.C. § 1098a(a)(1). After obtaining thoserecommendations, the Department published a notice ofintent to engage in negotiated rulemaking regarding borrowerdefenses and a request for public comment on August 20,

2015. 1 Negotiated Rulemaking Committee, Public Hearings,80 Fed. Reg. 50,588 (Aug. 20, 2015). The Departmentselected a committee, but after a series of meetings in early2016, the negotiators were unable to reach consensus. June16, 2016 NPRM, 81 Fed. Reg. at 39,333–34. As a result, theDepartment issued its own notice of proposed rulemaking onJune 16, 2016, and invited the members of the negotiatingcommittee, in addition to members of the public, to submitcomments on a set of regulations crafted by the Departmentin light of the negotiations and earlier public hearings. Id.More than 50,000 parties submitted comments in response tothe Department's notice of proposed rulemaking. BorrowerDefense Regulations, 81 Fed. Reg. at 75,928.

On November 1, 2016, the Department published the finalregulations governing the Direct Loan Program. See id. at75,926. In relevant part, the Borrower Defense Regulations:(1) revised the procedures for student borrowers seeking todischarge their federal loans as a result of school misconduct;(2) revised the processes for students seeking other formsof debt relief; (3) required “financially risky institutions[to be] prepared to take responsibility for the losses to thegovernment for discharges of and repayments for [f]ederalstudent loans;” (4) expanded the disclosure obligations ofinstitutions “at which the median borrower has not repaidin full, or made loan payments sufficient to reduce byat the least one dollar the outstanding balance of the

borrower's loans received at the institution;” (5) alteredthe standard for students asserting a “borrower defense” tocollection actions; (6) expanded the situations in which theDepartment could proactively forgive loans in groups, ratherthan upon individual applications; and (7) prohibited schools“participating in the Direct Loan Program from obtaining”or relying upon a borrower's “waive[r] [of] his or her rightto initiate or participate in a class action lawsuit,” or “fromrequiring students to engage in internal dispute processesbefore contacting accrediting or government agencies.” Id. at75,926–27.

The Borrower Defense Regulations were set to take effecteight months later, on July 1, 2017.

B. California Association of Private PostsecondarySchools LitigationThe California Association of Private Postsecondary Schoolsis an industry group that represents schools subject toprovisions of the Borrower Defense Regulations. CAPPSfiled suit in this Court on May 24, 2017, alleging that fouraspects of the regulations were unlawful. See Dkt. 1 at 69–75(Compl. ¶ ¶202–41), *82 CAPPS v. DeVos, Civ. No. 17-999(D.D.C.). In particular, CAPPS challenged (1) changes to theprocedures and options available to students seeking debtrelief; (2) modifications of certain financial responsibilitystandards; (3) requirements that proprietary schools discloseadditional information about loan repayment rates to studentsand prospective students; and (4) prohibitions on the inclusionof or reliance on arbitration and class action waiver provisionsin contracts with students. Id. CAPPS sought to enjoin theDepartment “from implementing, applying, or taking anyaction whatsoever pursuant to the final regulations,” and tovacate the entirety of the final rule. Dkt. 1 at 75 (Compl. ¶242), CAPPS, Civ. No. 17-1999.

On June 2, 2017, CAPPS filed a motion for preliminaryinjunction. Dkt. 6, CAPPS, Civ. No. 17-999. The relief soughtin that motion, however, was more limited than that sought inthe complaint; CAPPS sought preliminarily to enjoin only theprovision of the Borrower Defense Regulations prohibitingpredispute arbitration clauses and class action waivers. Id. at1. The Court set a briefing schedule, ordering the Departmentto file its opposition on or before June 15, 2017. MinuteEntry (June 6, 2017), CAPPS, Civ. No. 17-999. On June 13,2017, the same states that are plaintiffs in the present actionmoved to intervene as defendants in the CAPPS case andwere soon followed by Bauer and Del Rose. Dkt. 16, Dkt.22, Dkt. 31, CAPPS, Civ. No. 17-999. The day before the

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Department's opposition to CAPPS's motion was due, theDepartment notified the Court that it was in the process ofstaying the implementation of the entirety of the Borrower

Defense Regulations under § 705 of the APA. 2 Dkt. 20,CAPPS, Civ. No. 17-999. At that point, CAPPS withdrew itsmotion for a preliminary injunction, Dkt. 21, CAPPS, Civ. No.17-999, and, on September 6, 2017, the Department filed ananswer, Dkt. 52, CAPPS, Civ. No. 17-999. Neither party tookany step thereafter to advance the CAPPS litigation.

C. Present ActionOn July 6, 2017, shortly after the Department issued itsSection 705 Stay, Plaintiffs Meaghan Bauer and StephanoDel Rose filed the present action. Dkt. 1. Bauer and DelRose attended New England Institute of Art (“NEIA”), a for-

profit college. Dkt. 53 at 10 (Compl. ¶ 35). 3 Bauer attendeda filmmaking program from 2011 to 2014. Id. Del Roseattended the same program from 2009 to 2014. Id. Eachborrowed more than $30,000 in federal direct loans to financehis or her attendance. Id. (Compl. ¶¶ 36–37). Each now owesmore than $40,000 to the Department. Id. Bauer and Del Roseboth seek loan forgiveness as a result of “NEIA's fraud andother related misconduct,” id. at 12 (Compl. ¶ 45); they alsowish to bring a class action on behalf of students at NEIA, id.at 11 (Compl. ¶ 40). As such, they allege that the continueddelay in implementing the Borrower Defense Regulations hasimpaired their ability to vindicate their rights against NEIAand to obtain related relief. Id. at 12–17 (Compl. ¶¶ 44–62).

The state plaintiffs include nineteen states and the Districtof Columbia. Dkt. *83 80 at 1–2 (Compl.), Massachusetts

v. DeVos, Civ. No. 17-1331 (D.D.C.). 4 The states allegethat they “initiate numerous investigations and enforcementactions against proprietary and for-profit schools forviolations of the States' consumer protection statutes,” id. at15 (Compl. ¶ 61), and that the Borrower Defense Regulations“afford[ ] a legally significant status to enforcementactions and investigations undertaken by state attorneysgeneral,” id. at 22 (Compl. ¶ 77). Specifically, under therule, “[a] successful enforcement action brought against apostsecondary institution by a state attorney general givesrise to a borrower defense to loan repayment,” and “astate agency's issuance of a civil investigative demandagainst a school whose conduct resulted in a borrowerdefense will qualify as notice permitting the Secretaryof Education to seek repayment from the school for anyamounts forgiven.” Id. The state plaintiffs argue that, “[b]yincorporating state enforcement actions and investigations

into the Department's borrower defense framework, theBorrower Defense [Regulations] enhance the effectivenessof state enforcement efforts and the remedies available forviolations of state law.” Id. (Compl. ¶ 78). The states,moreover, argue that the Borrower Defense Regulationsprotect “the economic health and well-being of state residentsand ... the quality of higher education within each state.” Dkt.64 at 23.

Although the state and student borrower plaintiffs initiallychallenged only the Section 705 Stay, over the course of thelast year, they have amended their complaints to encompasschallenges to additional agency actions delaying the effectivedate of the Borrower Defense Regulations. See Dkt. 25;Dkt. 53; see also Dkt. 46, Dkt. 80, Massachusetts v. DeVos,Civ. No. 17-1331. The Court discusses each of those agencyactions in turn.

1. Section 705 Stay and Notice of Negotiated Rulemakingto Revise Borrower Defense Regulations

On June 16, 2017, the Department published a notice in theFederal Register delaying the effective date of the BorrowerDefense Regulations “until the judicial challenges to the

regulations are resolved.” 5 William D. Ford Federal DirectLoan Program (“Section 705 Stay”), 82 Fed. Reg. 27,621,27,621 (June 16, 2017). The Department premised thatdecision on § 705 of the APA, which authorizes an agencyto “postpone the effective date of action taken by it, pendingjudicial review,” if the “agency finds that justice so requires.”5 U.S.C. § 705. In the view of the Department, this standardwas satisfied “[i]n light of the existence and potential *84consequences of the pending [CAPPS ] litigation.” Section705 Stay, 82 Fed. Reg. at 27,621.

The Department identified three factors in support of itsconclusion that a delay was justified under § 705. First,it found value in “preserv[ing] the regulatory status quo,”because the CAPPS “plaintiffs ha[d] raised serious questionsconcerning the validity of certain provisions of the finalregulations and ha[d] identified substantial injuries that couldresult if the final regulations [went] into effect before thosequestions [were] resolved.” Id. Specifically, the Departmentpointed to the cost to institutions of “modify[ing] theircontracts in accordance with the arbitration and class actionwaiver regulations, which may be contrary to their interests”and complying with the regulations' financial responsibilityprovisions. Id. On the other side of the balance, theDepartment found that the delay would cause little harm to

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