Toby Merrill Challenges Predatory Student Lending by For-Profit Colleges

As a Skadden Fellow, Toby Merrill (’12) founded the Project on Predatory Student Lending (PPSL) at Harvard Law School’s Legal Services Center, where she continues to serve as the project’s director. PPSL seeks to represent students in cases challenging the fraud perpetrated by for-profit colleges, such as false advertising and job-placement claims, that lures borrowers into spending tens of thousands of dollars for often-worthless degrees.

Over the past six years, in addition to litigating several groundbreaking cases and representing hundreds of individual clients, Toby has helped rewrite federal regulations that have paved the way for her and other advocates — including several students she mentored as a clinical instructor at her alma mater, Harvard Law — to pursue a wider range of impact litigation. She also has led the expansion of PPSL, from a one-woman operation to its current team of 11.

As a Fellow, Toby met with community organizations and service providers, such as Compass Working Capital and EMPath, to learn about the issues they were seeing in predatory student lending, and to explain how student debt can be a legal matter. “Back then, even the legal services providers saw these loans like overdue utility bills — it didn’t necessarily seem like an issue they could do something about,” Toby recalls. “One thing I tried to make clear was that there are legal remedies for student loan debt, especially when the debt is incurred by fraudulent, unfair or deceptive means.”

As Toby began representing clients, she realized that the number of people who had viable claims was far greater than the number she or PPSL could represent. She decided to try to develop high-impact, affirmative litigation to attack the problems that allow predatory lending to thrive. Unfortunately, the schools had done their best to make such cases all but impossible.

“Perhaps the most significant hurdle we faced is that for-profit colleges use forced arbitration, which keeps claims against them out of court,” Toby says. “If you want to bring a class action or make precedential case law — if you want to try to solve a bigger problem or use a bigger strategy — mandatory arbitration makes that really, really hard.”

Toby recognized that the best solution for overcoming the arbitration clauses wasn’t likely to come from the courts, but rather via regulation. During the Department of Education’s negotiated rulemaking process, representatives of the various stakeholders— e.g., schools, students, lenders and debtors — gather to make regulations under the Higher Education Act, which regulates the distribution of federal financial aid funds. In 2016, Toby and a colleague proposed a provision that would prevent schools that receive federal student loan money from using forced arbitration. Much to their surprise, the provision was adopted, and the rule was issued on November 1, 2016 — exactly one week before the 2016 election — and slated to take effect by July 1, 2017. A few weeks before the implementation date, the rule was unilaterally and illegally delayed by the new administration.

After the implementation was pushed back, Toby and PPSL challenged the delays in the U.S. District Court for the District of Columbia in Bauer v. DeVos, and won in September 2018. The rule took effect the following month. In December, as a result of the ruling, the DOE agreed to cancel $150 million in loans for 15,000 former students of for-profit colleges that closed between November 1, 2013, and December 4, 2018.

Even before this victory, Toby and PPSL were litigating a class action on behalf of 60,000 former students of Corinthian Colleges against Education Secretary Betsy DeVos and the DOE. (The class action was possible because the government is not a party to the arbitration clauses.) The plaintiffs in Calvillo Manriquez v. DeVos filed suit after the DOE required Corinthian Colleges graduates to pay back a substantial portion of their debt despite the agency’s earlier finding that these borrowers were entitled to have their loans completely discharged. In May 2018, a federal judge in California blocked the DOE from collecting on the plaintiffs’ loans, and in October the court certified a nationwide class of up to 110,000 students.

Toby also continues to lead the clinic on predatory student lending at Harvard that she founded in 2012. Because forced arbitration has been a standard practice for several decades, people haven’t been able to bring claims in court and little applicable case law exists, meaning that she and her students will have opportunities to break new ground.

“I was a student in this clinic, so I know the impact that being exposed to meaningful, creative, high-powered litigation can have on career plans of people who really want to make a difference,” Toby says. “This field has plenty of opportunities, so that’s always my goal — to give my students that experience.”