PEABODY — Amid the news of 18 attorneys general — including Massachusetts' Maura Healey — suing U.S. Education Secretary Betsy DeVos for freezing new college student loan protections, a separate lawsuit was filed Thursday against DeVos by a Peabody woman and another former art student.

Meaghan Bauer, of Peabody, and Stephano Del Rose, of Canton, were both students at the New England Institute of Art in Brookline and claim they were victims of fraudulent activities by the for-profit college.

They are suing DeVos, and the U.S. Department of Education, for the delay in implementing loan protections, which they say hinders the case they are going to bring against the art institute and its parent company, Education Management Corporation (EDMC).

The larger argument in both lawsuits is that predatory schools in the for-profit higher education industry perpetrated major fraud. When that fraud was exposed, institutions collapsed, leaving student borrowers saddled with big debts and a worthless degree, or no degree at all, to show for it.

The Obama administration began drafting protections for student borrowers several years ago. Those protections, Borrower Defense Regulations, would wipe out federal loan debt for college students who were cheated by their institutions.

The regulations were finally approved and set to take effect July 1 when DeVos halted that process last month, citing a pending federal lawsuit from an association of for-profit schools in California.

DeVos, according to various news reports, called the new process "muddled" and said she wanted to start over on the regulatory work.

The two students and attorneys general argue this merely favors the for-profit industry, and is an overstep of DeVos' authority.

Enrollment contracts

Of particular concern are signed enrollment contracts Bauer, Del Rose and other students had with the art institute. The contracts prevent them from participating in a class action suit against the school.

Under the Borrower Defense Regulations, however, these contracts would be nullified because of the federal financial aid involved.

Bauer and Del Rose's suit states they are seeking to file a state-law case against the school and EDMC under the Massachusetts Consumer Protection Act, but don't want to do so until the new federal regulations are in place. At that point, they believe the school would not try to enforce the arbitration provision and class-action waiver in the contracts, which would go against federal law.

The art institute stopped enrolling new students in 2015. The same year, EDMC agreed to a $95 million settlement in a government lawsuit that charged the institution with making illegal payments to recruiters.

Bauer, according to the suit, owes more than $41,000 to the Department of Education for her federal loans to attend the school, while Del Rose owes about $40,000.

Bauer attended the institute from 2011 to 2014. Del Rose was there from 2009 to 2014. Both studied digital filmmaking and video production.

"(They) relied on numerous representations made by (New England Institute of Art) with respect to the quality of instruction and equipment, the school's industry connections, the job prospects for NEIA graduates, the school's job placement assistance, and the school's high costs, especially in comparison to its graduates' low-paying employment. They later learned that many of these representations were untrue," the suit states.

Targeting low-income students

Among other things, they claim the school targeted low-income students and left them with unmanageable debt that has now hindered their ability to obtain further education and training.

Bauer, according to her online profile, works as a line cook at the 99 Restaurants chain and has studied at North Shore Community College.

The suit states that since 2015, Bauer and Del Rose have had pending applications in to the Department of Education to cancel their loan debts under existing regulations, but that process lacks clarity and offers much weaker protections than the new process.

The new regulations would place a greater burden on the Department of Education to resolve cases.

And while those cases are pending, automatic forbearance would be given on payments for any loans that weren't already in default and which were being challenged.

The suit was filed on behalf of Bauer and Del Rose by two lawyers with the Project on Predatory Student Lending at Harvard Law School and two other lawyers with the Public Citizen Litigation Group in Washington, D.C.

Staff writer John Castelluccio can be reached at 978-338-2677 or jcastelluccio@salemnews.com.

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