UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


ARMSTRONG, VANESSA

v.

ACCRDTNG CNCL EDUC


97-5316a

D.C. Cir. 1999


*	*	*


Tatel, Circuit Judge: In this case, we must decide whether  appellant,
a student who attended a for-profit vocational  school with help from
a federally guaranteed student loan,  may assert the school's alleged
fraud and failure to provide  the education it promised as a defense
against the lender's  effort to collect the loan. Although federal
student loan  policy now recognizes school misconduct defenses against
 lenders who have "referral relationships" with for-profit  schools,
appellant obtained her loan in the late 1980s, a time  when federal
policy protected lenders from such defenses.  Because we find no basis
for applying the new standards  retroactively to appellant's loan, we
affirm the district court's  dismissal of her claims for declaratory
and injunctive relief.


I


Established by the Higher Education Act of 1965, the  Guaranteed
Student Loan Program provides interest rate  subsidies and federal
insurance for private lenders to make  student loans. See 20 U.S.C. s
1078(a), (c) (1994).* To raise  funds to make, i.e. "originate,"
additional loans, original lend- ers sell loans to other lenders on a
secondary loan market. 




__________

n * The Guaranteed Student Loan Program has since been re- named the
Federal Family Education Loan Program. See Higher  Education Act
Amendments of 1992, Pub. L. No. 102-325, sec.  411(a)(1), s 1071, 106
Stat. 448, 510. Throughout this opinion, we  refer to the program as
the GSLP, its name at the time appellant  borrowed in 1988; where
relevant, we cite law in effect in 1988.


So-called "guaranty agencies" guarantee the loans, paying  loan holders
the amounts due and taking assignment of the  loans if students
default. See id. s 1078(c). The Secretary of  Education "reinsures"
the loans and ultimately reimburses  guaranty agencies on a sliding
scale. See id. s 1078(c)(1).  Although guaranteed student loans often
change hands many  times, they are not considered negotiable
instruments; nei- ther repurchasers nor assignees become "holders in
due  course." See Jackson v. Culinary Sch., 788 F. Supp. 1233,  1248
n.9 (D.D.C. 1992), rev'd on other grounds, 27 F.2d 573  (D.C. Cir.
1994), vacated, 515 U.S. 1139, on reconsideration,  59 F.3d 354 (D.C.
Cir. 1995). Instead, subsequent holders  assume loans subject to all
claims and defenses available  against original lenders. Cf. 34 C.F.R.


Students may use federally guaranteed student loans to  attend
"eligible" schools, including for-profit vocational  schools. See 20
U.S.C. s 1085(a)(1) (1988). To establish  eligibility, vocational
schools must be accredited by a national- ly recognized accrediting
agency. See id. s 1085(c)(4). The  Secretary requires eligible schools
to perform certain func- tions to facilitate student access to
guaranteed loans, includ- ing giving students information on loan
availability, certifying  student eligibility to participate in the
federal loan program,  and forwarding applications to lenders. See 34
C.F.R.  ss 668.41-.43, 682.102(a), 682.603 (1988).


Federal student loan policy has undergone two significant  changes
relevant to this case. The first began in 1979 when  Congress amended
the Higher Education Act to encourage  lenders to market loans to
for-profit vocational school stu- dents. See Higher Education
Technical Amendments of 1979,  Pub. L. No. 96-49, 93 Stat. 351. The
1979 amendments  removed a ceiling on the federal interest subsidy
paid to  participating GSLP lenders, "making proprietary school 
loans, which had previously been considered as too risky,  more
attractive." S. Rep. No. 102-58, at 6 (1991) ("Senate  Report"). Later
amendments removed other limitations on  student borrowers attending
for-profit schools, increased ag- gregate loan limits, and allowed


pleted high school to use GSLP loans to attend accredited 
postsecondary schools. See Education Amendments of 1980,  Pub. L. No.
96-374, 94 Stat. 1367; Higher Education Amend- ments of 1986, Pub. L.
No. 99-498, sec. 425, s 1075(a), 100  Stat. 1268, 1359; id. sec. 481,
s 1088, 100 Stat. 1268, 1476.


To further encourage private lenders to make vocational  school student
loans, Congress excluded GSLP loans from the  Truth in Lending Act
("TILA"). See Pub. L. No. 97-320, sec.  701(a), s 1603, 96 Stat. 1469,
1538 (1982). As a result, the  Federal Trade Commission stopped
enforcing various TILA  regulations against GSLP lenders, including
the "Holder  Rule." Adopted by the FTC in 1976, the Holder Rule 
requires purchase money loan agreements (loans supplying  money for
the purchase of goods or services) arranged by  sellers to contain a
notice to all loan holders that preserves  the borrower's ability to
raise claims and defenses against the  lender arising from the
seller's misconduct. See 16 C.F.R.  s 433.2(a) (1998). For example, if
a used car dealer who  fraudulently sells a lemon also arranges the
buyer's financing  through a bank, the buyer may rely on the dealer's
fraud as a  defense against repaying the bank loan. Ending enforcement
 of the Holder Rule with respect to GSLP loans thus had the  effect of
protecting lenders from claims and defenses students  could raise


This lender protection from student suits had one major  exception:
where lenders delegated to schools "substantial  functions or
responsibilities normally performed by lenders  before making loans."
51 Fed. Reg. 40,890 (1986); 34 C.F.R.  s 682.206(a)(2) (1988). In such
cases, the Department of  Education's "origination policy" kicked in,
treating the  schools--not the banks--as the lenders that had
effectively  made the original loans. See 34 C.F.R. s 682.200(b)
(1988).  As a result, all subsequent loan holders (remember, there are
 no holders in due course) were subject to claims and defenses  that
students could raise against their schools. Cf. id.  s 682.508(c). But
so long as lenders avoided school- origination relationships, they
could make and sell loans  without fear that students could assert
school misconduct as a  defense against repaying their loans.


These changes in the Guaranteed Student Loan Program  accomplished
their purpose. Lending to for-profit school  students mushroomed,
increasing more than six-fold between  1982 and 1988. See Senate
Report at 6-7. The changes also  had unintended consequences. As a
result of the GSLP's  easy source of funding, large numbers of
for-profit schools  sprang up, admitted poorly prepared students, and
offered  shoddy programs. See id. at 2-3, 8-13. Graduates of these 
schools were often unable to get jobs. Default rates climbed 
dramatically, rising as high as 39%. See id. at 2. Because  loan
guaranty agencies were unable to keep up with growing  default rates,
many had to be bailed out by the Secretary.  See, e.g., id. at 22.


In order to curb high default rates and protect students  from
for-profit school abuses, Congress initiated a second  round of
changes to the Guaranteed Student Loan Program  in 1992. One change
directed the Secretary to terminate  GSLP eligibility of for-profit
schools with consistently high  default rates. See Pub. L. No.
102-325, sec. 427(a), s 1085,  106 Stat. at 549 (redefining "eligible
institution" to exclude  schools with excessive default rates). As a
result, many for- profit schools were eliminated from the program.


Congress also directed the Secretary to develop a "Com- mon Guaranteed
Student Loan Application Form and Prom- issory Note" specifying the
contractual terms governing  guaranteed student loans, and to study
the possibility of per- mitting students to raise fraud-based state
law defenses  against repayment of student loans. See id. s 425(e),
106  Stat. at 546; id. s 1403, 106 Stat. at 817. Responding to  these
directives, the Secretary prepared a common promisso- ry note and
included in it a provision modeled on the FTC  Holder Rule that was
directed specifically at lenders affiliat- ed with for-profit schools.
See U.S. Dep't of Educ., Applica- tion and Promissory Note for Federal
Stafford Loans  (Subsidized and Unsubsidized) and Federal Supplemental
 Loans for Students (SLS) (1993) ("Common Promissory  Note"). In fact,
one year earlier the FTC had renewed  enforcement of the Holder Rule
with respect to GSLP loans.  See, e.g., Letter from Jean Noonan,
Associate Director for 


Credit Practices, Federal Trade Commission, to Jonathan  Sheldon,
National Consumer Law Center (July 24, 1991)  ("FTC Opinion").


Treating GSLP lenders like banks that allow used car  dealers to
arrange financing, the Holder Rule notice the  Secretary included in
the common promissory note, together  with the FTC's renewed
enforcement policy, made GSLP loan  holders "subject to all claims and
defenses" that the student  borrower could raise against the school.
Common Promisso- ry Note. The notice applies where the loan is "used
to pay  tuition and charges of a for-profit school that refers loan 
applicants to the lender or that is affiliated with the lender by 
common control, contract or business arrangement." Id.  (emphasis
added). According to the Department, "refers"  means that a school,
with a lender's knowledge, goes beyond  "giv[ing] its students
information on the availability of stu- dent loans" and "recommend[s]
that the applicants seek loans  from [a particular] lender." U.S.
Dep't of Educ., Overview,  Federal Trade Commission (FTC) Holder Rule
2, 3 (July 2,  1993) ("Overview, FTC Rule"). A school also "refers"
loan  applicants when it "contact[s] a particular lender to inquire 
whether that lender would be willing to make loans for its  own
students, and later include[s] this lender (if it responded 
positively) on its information list of lenders." Id. at 2. No 
referral relationship exists where a school simply "obtain[s]  its
lender information from third-party sources ... or from a  more
generalized school inquiry to a lender (e.g., asking  merely whether
the lender is generally willing to make loans  to trade school
students in a particular state.)." Id. Al- though the common
promissory note's Holder Rule notice  expands lender liability beyond
that authorized by the De- partment's origination policy, the
Department has made clear  that even under the notice's lower
threshold lenders may  protect themselves from school misconduct
defenses by limit- ing their cooperation with schools to the few
obligations  mandated by the Higher Education Act and implementing 
regulations (i.e., providing students with information on loan 
availability, certifying student eligibility, and forwarding ap-


Commission (FTC) Holder Rule: Questions/Answers 4 (July  27, 1993); 34
C.F.R. s 682.206 (1997).


The loan at issue in this case was made in 1988, during the  time when
federal student loan policy encouraged lenders to  make GSLP loans to
vocational school students and prior to  inclusion of the Holder Rule
notice in GSLP promissory  notes. Appellant Vanessa Armstrong was
recruited by Na- tional Business School, a for-profit vocational
school operating  in Washington, D.C., to enroll in its automobile
mechanic  training program. With help from the school, Armstrong 
obtained a $4,000 GSLP loan from the First Independent  Trust Company
of California ("FITCO"). One of the largest  sources of loans for
students attending for-profit schools in  the late 1980s, FITCO was
singled out for its abuse of the  Guaranteed Student Loan Program
during the hearings that  led to the 1992 revamping of federal student
loan policy. See  Senate Report at 21-24, 28.


According to Armstrong, a National Business School repre- sentative
prepared her loan application, specified the type of  loan, determined
the loan amount, prepared the promissory  note, selected FITCO as the
lender, presented the loan  agreement to Armstrong to sign, and
forwarded the loan  application and promissory note to FITCO. See Am.
Compl.  pp 22, 24. Printed on standard forms provided by FITCO's 
guaranty agency, the promissory note contained a choice of  law clause
that subjected the loan contract to the laws of the  state of the
lender, in this case California. Like other  student loan promissory
notes issued at the time, the note  contained no Holder Rule notice.
Armstrong alleges that the  school and its accrediting agency, the
Accrediting Council for  Continuing Education & Training, Inc.
("ACCET"), repre- sented that the school offered a nationally
accredited program  in 1988; in fact, she claims, its accreditation
had expired a  year earlier. See id. pp 2, 29-34.


Armstrong claims that National Business School failed to  provide the
promised training, equipment, and job placement  services, "leaving
[her] and other students to repay student  loans for an education that
they never received." Id. p 2; see 


also id. p 77. The school closed its doors in 1990 and filed for 
bankruptcy. Although the school had charged each student  over $5,000,
Armstrong and other former students who filed  claims in the
bankruptcy proceedings each recovered only  $900. See Compl. p 26.


Armstrong filed suit in the United States District Court for  the
District of Columbia, asserting federal claims based on  the FTC
Holder Rule and the Department's school- origination policy, as well
as pendant state law claims based  on the District of Columbia
Consumer Credit Protection Act  ("CCPA") and common law contract
doctrines. The com- plaint sought damages, restitution, and
declaratory relief  against ACCET and each of the entities that could
enforce  the loan, all appellees in this case: Bank of America,  N.T.
& S.A. (the current loan holder); California Student  Loan Financing
Corporation (a corporation that acquires  student loans on the
secondary market and which directed  Bank of America to purchase
Armstrong's loan as its trustee);  the Secretary of Education (who
assumed the guarantee of  Armstrong's loan after the original
guarantor became insol- vent); and Educational Credit Management
Corporation (a  corporation created by the Department to manage loan
guar- antees assumed by the Secretary). Dismissing her federal 
claims, the district court held that no cause of action arises  under
the Department's school-origination policy or the FTC  Rule. See
Armstrong v. Accrediting Council for Continuing  Educ. & Training,
Inc., 832 F. Supp. 419, 432 (D.D.C. 1993)  ("Armstrong I"). Armstrong
now concedes this point. The  district court also dismissed
Armstrong's state law claims  except her common law fraud and


On appeal, this court found that the district court, having  dismissed
the federal claims, failed to "expressly exercise its  discretion to
maintain or decline jurisdiction over the pendant  claims under 28
U.S.C. s 1367." Armstrong v. Accrediting  Council for Continuing Educ.
& Training, Inc., 84 F.3d 1452  (D.C. Cir. 1996) (unpublished table
decision), 1996 WL  250412, at *1. We remanded to the district court
for further  proceedings.


Exercising its discretion, the district court again dismissed 
Armstrong's claims as to all defendants except ACCET  (which
subsequently settled with Armstrong and is no longer  involved in
these proceedings). See Armstrong v. Accredit- ing Council for
Continuing Educ. & Training, Inc., 980  F. Supp. 53 (D.D.C. 1997)
("Armstrong II"). The district  court held that Armstrong had no claim
under the District of  Columbia CCPA because the choice of law clause
made  California law applicable. It rejected her argument that the 
so-called "public policy exception" in choice of law doctrine 
required D.C. courts to override the choice of law clause and  to
apply the District's more protective consumer protection  statute
instead. See id. at 59-60. As to Armstrong's mistake  and illegality
claims, the district court found that the school  had not lost its
GSLP eligibility until after she enrolled, and  that at any rate
federal Higher Education Act policy  preempted state law defenses


Appealing again, Armstrong reasserts her state law claims,  arguing:
(1) that the Holder Rule notice should be implied  into her loan
contract; (2) that the school's loss of accredita- tion rendered it
ineligible to participate in the GSLP pro- gram, making her loan
unenforceable on grounds of mistake  or illegality; and (3) that the
district court should not have  applied the choice of law clause
because it conflicts with D.C.  public policy enacted to protect
District citizens. With re- spect to the last claim, Armstrong asks us
alternatively to  certify the choice of law question to the District
of Columbia  Court of Appeals. Our review is de novo. See Systems 
Council EM-3 v. AT&T Corp., 159 F.3d 1376, 1378 (D.C. Cir.  1998).


II


We begin with Armstrong's implied contract claim. Rely- ing on the FTC
Holder Rule, she argues that National  Business School had a "referral
relationship" or "affiliation"  with FITCO, thus permitting her to
treat subsequent lenders  as "standing in the shoes" of the school and
to assert the 


school's misconduct as a defense against loan repayment. As  the
government acknowledged at oral argument, had Arm- strong signed her
loan contract after the 1992 amendments to  the Higher Education Act,
at which point the Secretary  incorporated the Holder Rule notice into
the common promis- sory note, she might well have a claim. Armstrong's
allega- tion that the school gave her a loan application preprinted 
with FITCO's name as the chosen lender would support a  Holder Rule
notice claim because the school "recommend[ed]  that the applicants
seek loans" from FITCO, and FITCO  either supplied the preprinted
forms itself or "kn[e]w that a  loan applicant was referred by [the]
school." Overview, FTC  Rule at 2, 3.


Acknowledging that her pre-1992 loan agreement contained  no Holder
Rule notice, Armstrong argues that the FTC's  Holder Rule nevertheless
required the notice's inclusion and  that the court should therefore
enforce it as an implied  contractual term. She relies on the common
law principle  that contracts incorporate the law in force at the time
of the  agreement. See United Van Lines, Inc. v. United States, 448 
F.2d 1190, 1195 (D.C. Cir. 1971) ("Because the regulation was  in
existence at the time [the party] entered on performance, it  became,
in effect, a part of the contract between the par- ties."); see also
Ballarini v. Schlage Lock Co., 226 P.2d 771,  773-74 (Cal. 1950) ("The
settled law of the land at the time a  contract is made becomes a part
of it and must be read into  it."). Appellees disagree. They argue
that the FTC Holder  Rule did not apply to student loans made in 1988
and that  even if it did, its terms cannot be implied into Armstrong's
 agreement.


We think appellees have the better of this argument.  Although the
Truth in Lending Act, the source of the Holder  Rule, originally
covered GSLP lending, Congress expressly  exempted student loans from
the Act in 1982. At that point  the FTC stopped enforcing the Holder
Rule with respect to  GSLP loans. Not until after Armstrong obtained
her loan  from FITCO did the FTC again begin enforcing the Holder 
Rule in GSLP loans, and not until after that did the Secretary 
incorporate the notice into the common promissory note. See 


supra at 4, 5. Facing circumstances very much like those  presented in
this case, the Seventh Circuit, relying on the  1982 TILA Amendments,
expressly held the Holder Rule  inapplicable to guaranteed student
loans obtained prior to  renewal of Holder Rule enforcement. See Veal
v. First Am.  Sav. Bank, 914 F.2d 909, 914 (7th Cir. 1990).


To be sure, both the FTC and the Secretary have since  suggested that
the Holder Rule did in fact apply to guaran- teed student loans during
the period when Armstrong ob- tained her loan. See FTC Opinion at 2-3
(rejecting its  previous "literal interpretation" exempting GSLP loans
from  the Holder Rule and claiming that Congress did not mean to 
exclude such loans from the Rule's coverage when it exempt- ed them
from TILA); Overview, FTC Rule at 1 (concluding  that "the FTC Holder
Rule notice must be included in the  common application/promissory
note."). In our view, howev- er, these later developments are
insufficient to overcome the  clear implications of the 1982 TILA
Amendments and the  FTC's nonenforcement policy. Moreover, even if
there were  some ambiguity as to the Holder Rule's applicability to 
student loans during the late 1980s, we would not imply the  terms of
the notice into Armstrong's loan for one simple  reason: No one could
reasonably argue that in 1988 appel- lees, the purchasers and
assignees of Armstrong's note (which  contained no Holder Rule
notice), should have known that the  Holder Rule nevertheless applied
to GSLP loans at that time.  Lenders still operated under a federal
program that encour- aged them to make loans for attendance at
virtually any  accredited school, no matter how deficient or
disreputable.  While Congress and the Department have since changed
the  rules, we think it would be unfair to apply the new rules to  old


Relying on contract-based theories of mistake and illegali- ty,
Armstrong next claims that her loan is void and unen- forceable
because National Business School had lost its ac- creditation in 1987
and was therefore not an institution  "eligible" for participation in
the federal student loan pro- gram. See 20 U.S.C. s 1085(a), (c)
(1988). The district court  rejected this claim, holding that schools
do not lose their 


GSLP eligibility until after a hearing before an administrative  law
judge; in this case the hearing did not occur until 1989, a  year
after Armstrong received her loan. Armstrong now  argues that the
district court mistakenly relied on regulatory  instead of statutory
eligibility rules. She points out that  under statutory rules, "the
effective date of a loss of eligibility  by reason of the failure of
an institution, its location, or its  program to satisfy the
applicable definitions continues to be  the date on which the failure
first occurred." 55 Fed. Reg.  32,181 (1990) (Secretary's explanation
of the effects of failure  to meet statutory requirements). We need
not resolve this  dispute to decide this case, for regardless of when
National  Business School lost its GSLP eligibility, we agree with the
 Secretary that federal student loan policy preempts Arm- strong's


Federal preemption can be express or implied. See Cippol- lone v.
Liggett Group, Inc., 505 U.S. 504, 516 (1992). Nothing  in the Higher
Education Act expressly preempts state law  claims of the kind raised
by Armstrong. Implied preemption  occurs either "where the scheme of
federal regulation is  sufficiently comprehensive to make reasonable
the inference  that Congress 'left no room' for supplementary state
regula- tion" (known as field preemption) or "in those areas where 
Congress has not completely displaced state regulation, ...  to the
extent [state law] actually conflicts with federal law"  (known as
conflict preemption). California Fed. Sav. & Loan  Ass'n v. Guerra,
479 U.S. 272, 281 (1987) (internal quotation  omitted). In Jackson v.
Culinary School, we held that feder- al education policy regarding
GSLP lending is not so exten- sive as to occupy the field. See Jackson
v. Culinary Sch., 27  F.3d 573, 580-81 (D.C. Cir. 1994), vacated on
other grounds,  515 U.S. 1139, on reconsideration, 59 F.3d 354 (D.C.
Cir.  1995). Jackson also recognized that the Higher Education  Act
preempts D.C. laws that "actually conflict" with federal  law. Id. at
581 (stating but declining to reach the conflict  preemption issue).
Although Jackson was later vacated on  other grounds, we believe that
it correctly stated and applied  federal preemption standards.


"Actual conflict" between Armstrong's contract claims and  Higher
Education Act regulations is precisely what has oc- curred here. If
accepted, Armstrong's claim that she may  void her student loan based
on the school's alleged GSLP  ineligibility would frustrate specific
federal policies regarding  the consequences of losing or falsely
certifying accreditation.  For example, it is the Secretary and
guaranty agencies--not  students--who enforce statutory and regulatory
require- ments, including those concerning accreditation and school 
misrepresentation. See 20 U.S.C. s 1094(c) (1988); 34 C.F.R.  ss
668.71-.75, 682.700-.710 (1988). Reinforcing this point,  the preamble
to the final rule regarding institutional eligibili- ty says this:


[The Department] considers the loss of institutional eligi- bility to
affect directly only the liability of the institution  for Federal
subsidies and reinsurance paid on those  loans.... [T]he borrower
retains all the rights with  respect to loan repayment that are
contained in the  terms of the loan agreements, and [the Department]
does  not suggest that these loans, whether held by the institu- tion
or the lender, are legally unenforceable merely  because they were
made after the effective date of the  loss of institutional


58 Fed. Reg. 13,337 (1993). Moreover, the Department ex- pressly
permits lenders to rely in good faith on eligibility  representations
by students and schools so long as the schools  did not "originate"
the loans. See 34 C.F.R. s 682.206(a)(2)  (1988). Allowing mistake and
illegality claims based on  GSLP eligibility requirements to void
student loan repayment  obligations would "stand[ ] 'as an obstacle to
the accomplish- ment and execution of the full purposes and objectives
of  Congress.' " Guerra, 479 U.S. at 281 (quoting Hines v. 
Davidowitz, 312 U.S. 52, 67 (1941)).


This brings us finally to Armstrong's claim under the  District of
Columbia Consumer Credit Protection Act. She  relies on section
28-3809, which provides:


(a) A lender who makes a direct installment loan for the  purpose of
enabling a consumer to purchase goods or  services is subject to all
claims and defenses of the 


consumer against the seller arising out of the purchase of  the goods
or service if such lender acts at the express  request of the seller,
and--


(1) the seller participates in the preparation of the  loan
instruments....


D.C. Code Ann. s 28-3809 (1981). Characterizing her guar- anteed
student loan as a "direct installment loan," Armstrong  argues that
National Business School's marketing of FITCO  loans through
preprinted application forms, along with its  assistance in filling
out loan applications, brings her loan  within the CCPA's protection.
According to appellees, the  district court properly dismissed
Armstrong's CCPA claim on  the ground that the promissory note's
choice of law clause  made California law applicable. See Armstrong


We need not determine whether D.C. courts would set  aside the choice
of law clause as contrary to D.C. public policy  or whether,
alternatively, to certify this question to the D.C.  Court of Appeals,
because we again agree with the Secretary  that Armstrong's state law
cause of action conflicts with pre- 1992 federal policy governing
guaranteed student loans. As  we have noted, pre-1992 federal student
loan policy was  intended to make student loans attractive to private
lenders  by protecting them from the financial consequences of stu-
dent default. Although the Department's school-origination  policy
certainly allows students to raise school misconduct  defenses in
limited circumstances, the Department expressly  warned that the
policy was "not intended to create any other  rights for student
borrowers or to suggest that borrowers are  excused from repaying
loans" except where there is a school- origination relationship. 58
Fed. Reg. 13,337 (1993). Allow- ing student borrowers to raise CCPA
defenses based on  school misconduct against lenders who do no more
than  permit schools to "participate[ ] in the preparation of the loan
 instruments" at the schools' "request," D.C. Code Ann.  s 28-3809(a),
would extend lender liability beyond school- origination
relationships. In letter rulings discussing circum- stances closely


assured lenders that they do not risk falling within the scope  of the
school-origination policy merely by "market[ing] GSL  lending by
sending combined application/promissory note/  disclosure forms ...
with the lender's name preprinted there- on, directly to the school,"
and allowing schools to assist  students in completing loan
applications on those forms.  Letter from John E. Dean, Clohan & Dean,
to Larry Oxen- dine, Director, Division of Policy and Program
Development,  U.S. Dep't of Educ. (Dec. 14, 1990); Letter from Larry 
Oxendine to John E. Dean (Feb. 20, 1991). Permitting  Armstrong to
raise CCPA defenses against repayment of her  pre-1992, pre-common
promissory note loan would subject  appellees to risks neither
anticipated by them nor intended  by the Guaranteed Student Loan


Nothing in United States v. Griffin, 707 F.2d 1477 (D.C.  Cir. 1983),
requires a different result. There, we found no  preemption of state
law defenses by a different student loan  program under which the
federal government insures GSLP  loans made directly by schools.
Because under that program  the student borrowed directly from the
school, the Depart- ment's school-origination policy squarely applied,
and the  asserted state law claims did not expand lender risk beyond 
that contemplated by federal policy. Moreover, allowing  students to
raise school misconduct defenses against the  federal government could
have had no impact on the private  lending that Congress considered so
critical to the operation  of the pre-1992 Guaranteed Student Loan


III


We acknowledge that denying relief to Armstrong may  seem unfair.
Lenders that permitted schools to abuse the  Guaranteed Student Loan
Program and that profited enor- mously prior to the 1992 changes are
protected by federal  preemption. Owners of schools that profited from
student  loans while failing to provide promised training and
resources  are protected by bankruptcy laws. Only the students, the 


very people the Guaranteed Student Loan Program was  intended to
benefit, are left holding the bag.


The 1992 changes in the federal student loan program went  a long way
toward eliminating this unfairness for students  who borrowed after
1992. The Secretary has even estab- lished loan discharge procedures
for two categories of pre- 1992 borrowers: those whose for-profit
schools closed while  they were in attendance, and those whose own
GSLP eligibili- ty (not the school's eligibility) was falsely
certified. See 34  C.F.R. s 682.402(d), (e) (1997). These procedures
provide no  relief for students like Armstrong, whose schools falsely 
represented their accreditation or engaged in other miscon- duct. We
have no authority to protect such students, but we  think the
Secretary does. See 20 U.S.C. ss 1082(a), 1087-0  (Supp. 1998).


So ordered.


Karen LeCraft Henderson, Circuit Judge, concurring:


I concur in the result but neither agree with nor deem  appropriate the
concluding two paragraphs of the opinion.  The student loan program
may have its flaws but there is no  basis to wring our hands over this
one, especially when  defaulting student loan borrowers constitute a
significant  national problem in the administration of the program.