Supreme Court Decision on Arbitration May Have Eroded For-Profit Students’ Right to Sue

The Education Department’s new regulations on misrepresentation that go into effect next month are intended to protect students from false advertising in the college recruitment process. But a recent U.S. Supreme Court ruling may push in the other direction — limiting the existing legal recourses of students who feel they’ve been defrauded by their colleges, particularly by for-profit institutions, which typically require them to settle disputes through arbitration.

In a recent case, a federal judge in Colorado denied class-action status for former students in their lawsuit against Westwood College, citing an April decision by the U.S. Supreme Court that strengthened arbitration clauses in consumer contracts. It’s the first instance in which the Supreme Court case, AT&T Mobility LLC v. Concepcion et ux., No. 09-893, has been cited in a legal fight over a for-profit college, and some education-law experts say the ruling is a sign of how similar cases will play out in the future. Going forward, students at for-profits seeking to take action against their colleges are most likely to wind up in binding arbitration—in which plaintiffs and defendants present their case in an out-of-court setting to a third party who makes a decision.

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