After earlier court victories, student advocates sue DeVos over loan relief claims
Lawyers for student borrowers have filed a myriad of lawsuits against Betsy DeVos, the US Secretary of Education.
They successfully argued that the Department of Education should be required to enforce a 2016 Borrower Defense Rule. And they successfully blocked a plan to offer partial loan forgiveness to former students of the Corinthian College which had previously been approved for debt relief.
Now these lawyers are aiming to force the ministry’s hand on a massive backlog of claims from borrowers who say they were misled by their colleges. This week, they filed a lawsuit in a California federal court that is seeking to have the delays in deciding those claims declared unlawful.
The total number of pending applications now stands at more than 150,000 – most of them from students who have taken programs run by for-profit university chains like Corinthian, ITT Tech and DeVry. And many have been filed since 2015.
Federal law gives student borrowers who have been misled by their college the ability to argue that their federal loans should be compensated through a process called borrower defense. The Obama administration has approved nearly 30,000 borrower defense requests. But reviews slowed to a complete halt under DeVos — a development the plaintiffs say caused borrowers to default and limited their ability to make important financial decisions or even apply for jobs.
“They’ve been clear that they not only don’t have a timeline to resolve the cases. They haven’t reviewed them,” said Eileen Connor, attorney and litigation director for the Predatory Student Loans Project, which filed the lawsuit. “It’s really unfair, because these students have valid grievances.”
Connor and the attorneys arguing the case also say the delays violate the Administrative Procedure Act’s requirement that federal agencies make prompt decisions. Unlike other lawsuits against the ministry, the plaintiffs are not asking for a court ruling that the ministry should cancel borrowers’ debts. Instead, they’re asking that the Trump administration begin issuing rulings on outstanding claims.
DeVos attributed the delays to ongoing litigation over the department’s partial loan relief formula, which a judge blocked last year.
In a statement to The Washington Post this week, Liz Hill, the department’s press secretary, said, “The only thing stopping the department from finalizing thousands of these claims is the steady stream of litigation brought by ideological special interests, so-called student advocates.” .
These arguments, Connor said, are a “total smokescreen” and do not explain the department’s inaction.
Legal battle over loan forgiveness
One of DeVos’ first actions as Education Secretary was to delay the Obama administration’s 2016 Borrower Defense Rule, which the Department of Education enacted following the shutdown. from Corinthian and the thousands of new loan forgiveness requests that followed. The rule established for the first time a uniform federal standard for borrower defense claims. But DeVos said he did not properly consider institutions’ concerns.
State attorneys general and the Predatory Lending Project sued, and a federal court ruled last year that the rule should go into effect. The decision did not lead to more decisions on borrower defense claims, however.
Federal data shows the department hasn’t approved or denied any claims for more than a year. Connor said the fight against the 2016 rule never stopped the Trump administration from taking action on thousands of previous borrower defense requests filed before July 2017, which alleged violations of the law of the State.
“The department has always had an obligation to review these requests and decide where there is a valid claim under state law,” she said.
These claims include one submitted by Alicia Davis, a former Corinthian student in Orlando. Davis, 36, completed a criminal justice program at Everest College for two years before transferring to Valencia Community College. Despite Everest’s assurances, his credits were not transferred to the new institution. And Davis alleged that Everest deceptively took out more than $20,000 in federally guaranteed loans in his name.
She eventually enrolled at the University of Central Florida, where she earned a bachelor’s and master’s degree. But his debt to Everest continued to swell. After filing for borrower defense in 2015 and again the following year, she defaulted on her loans.
“I can’t buy a car. I can’t buy a house. I’m not entitled to any of this,” she said. “It ruined me financially.”
Delinquent loans have also prevented Davis, a crime analyst with a local law enforcement agency, from applying for jobs with the federal government.
She said she received several threats from the Ministry of Education that her salary could be garnished and her tax refund offset. But Davis never received an update on the status of his application from the department, other than an acknowledgment of receipt of his application.
Other plaintiffs in the lawsuit say they delayed getting married or planning to have children because of the uncertainty surrounding their student loans.
Individual borrowers have already filed lawsuits against the ministry for delays in reviewing their claims. The department has settled a handful of those cases this year — in one case, allowing a borrower to repay student loans through bankruptcy.
Still, the lawsuit filed this week is the first time attorneys have sued the department on behalf of all borrowers with pending claims. The Predatory Student Loans Project also asked borrowers to submit affidavits online about how they were affected by the pending decision. More than 270 had submitted statements to a website as of Thursday.