U.S. Department of Education Secretary Betsy DeVos. (Photo:  Gage Skidmore via Wikimedia Commons)

A New York public interest group on Wednesday sued U.S. Education Secretary Betsy DeVos in Manhattan federal court over a new rule that rolls back Obama-era protections for students who claim they were defrauded by colleges or universities.

The lawsuit, filed by the Project on Predatory Student Lending and Public Citizen Litigation Group on behalf of the New York Legal Assistance Group, aims to invalidate borrower defense regulations that would impose new requirements and procedural hurdles for students looking to cancel fraudulent loan obligations.

According to the filing, the Department of Education did not take public comment on its planned changes, which NYLAG said would implement a new standard and make it "nearly impossible" for students to obtain loan forgiveness.

The new rule, set to take hold in July, also would shorten the statute of limitations for students to assert borrower defenses and eliminate their ability to pursue claims as a group when the schools they attended engaged in misconduct or suddenly closed. Among other things, it would establish an "extremely burdensome" application process and impose a tougher standard for relief that requires borrowers to submit more evidence.

The Education Department has pointed to a large number of past claims that it says were unsubstantiated as justification for the changes.

On Wednesday, a spokeswoman said "the department will vigorously defend its regulation, which gives students and borrowers the relief that they're owed, restores fairness and due process, extends the period for closed school discharges, and saves the taxpayers up to $11.1 billion over 10 years."

The Obama administration in 2016 overhauled rules protecting taxpayers and borrowers after a 2012 Senate committee report detailed predatory lending practices by for-profit colleges that misled prospective students about program costs and their options for federal financial assistance.

DeVos, starting in 2017, tried three times to block the rules from going into effect while the Education Department crafted new regulations. However, a federal judge later ruled those delays unlawful and ordered that the 2016 rules go into effect.

According to NYLAG's lawsuit, the resulting rule-making process under DeVos treated the Obama-era regulations as though they were no longer in effect and improperly shielded the rules from public comment procedures that are required by law.

"This devastating rule goes above and beyond the department's other significant efforts to deny defrauded students loan relief," Toby Merrill, director of the Project on Predatory Student Lending, said in a statement. "It imposes impossible standards for defrauded students seeking to assert their legal rights to loan cancellation, and relies on explanations that defy logic and rest on no evidence. There is no question this rule is illegal and will not stand up in court."

NYLAG, which offers services, including free legal counseling, to low income New Yorkers called the changes "arbitrary and capricious" and said it would be forced to divert additional time and resources to helping students navigate the administrative claims process.

"If allowed to go into effect, this rule not only would harm thousands of student loan borrowers with low income in New York and across the country, but also put a drain on the resources of NYLAG and other organizations that assist borrowers in seeking the relief they are entitled to," said Jane Greengold Stevens, co-director of NYLAG's Special Litigation Unit. "By issuing this rule, Secretary DeVos is helping for-profit schools evade responsibility and putting even more of a burden on students facing crushing debt."

NYLAG is represented in the suit by Adam Pulver and Adina Rosenbaum of the Public Citizen Litigation Group and Eileen Connor, Toby Merrill and Michael Turri of the Project on Predatory Student Lending.

An online docket-tracking service did not list counsel for Devos and the Education Department on Wednesday.

The case, captioned New York Legal Assistance Group v. DeVos, has not yet been assigned to a judge.

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