Lawsuits Prompt Education Dept. Action on Borrower Defense Delays

The U.S. Education Department on Wednesday announced a new plan to grant partial debt relief to student borrowers based on the earnings of graduates who attended a particular program of study, Inside Higher Ed reported.

Under its new policy, the department will grant borrowers full relief if they earn less than 50 percent of the average earnings of students in similar vocational programs, according to data collected under the gainful employment rule. If their pay is at or above that threshold, the department will provide relief on a sliding scale. The department argues that the new policy ensures fairness, but consumer advocates are concerned that the critics management of applications may create more problems than it solves, The Washington Post reported.

The announcement is the first substantial step Education Secretary Betsy DeVos has taken to clear a backlog of debt relief claims that amassed over the last year. It arrives as the secretary and the department are facing lawsuits from attorneys general and consumer advocates for halting the loan forgiveness process.

Four Democratic attorneys general of California, Illinois, Massachusetts, and New York filed suit against the U.S. Education Department for stalling decisions on loan forgiveness for students defrauded by for-profit colleges, Inside Higher Ed reported.

A lawsuit filed by California Attorney General Xavier Becerra argues that delays in approving borrower defense claims of defrauded Corinthian Colleges students violate federal law. A separate lawsuit filed in the D.C. District Court by the attorneys general of Massachusetts, Illinois, and New York argues that the department has illegally delayed review of pending claims and improperly rejected group discharge for thousands of borrowers who were misled by for-profit institutions.

Under borrower defense rules, student loan borrowers are allowed to apply for loan discharge when they are misled or defrauded by their institution. Following the collapse of Corinthian Colleges in 2015 and ITT Tech in 2016, tens of thousands of student filed debt relief claims. The Education Department granted nearly 28,000 claims between 2015 and January 20, 2017. However, the Trump administration halted the processing of claims as it re-examined the existing process for ruling on applications. More than 95,000 borrower defense claims remain pending by the department.

"After having their American dreams stolen by a so-called higher education institution, Corinthian students are now being denied critical relief by a secretary of education hostile to their plight," Attorney General Becerra said in a statement. "It is hard to believe that we are forced to sue the Department of Education to compel Secretary DeVos to carry out the department's legal duty and help these students rebuild their lives."

 

Related Links

Inside Higher Ed

https://www.insidehighered.com/news/2017/12/21/education-department-sets-standard-partial-relief-defrauded-borrowers

The Washington Post

https://www.washingtonpost.com/news/grade-point/wp/2017/12/20/betsy-devos-takes-action-on-backlog-of-student-debt-relief-claims/

Inside Higher Ed

https://www.insidehighered.com/quicktakes/2017/12/15/democratic-ags-sue-devos-borrower-defense