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Education Secretary Betsy DeVos rolls out new method for approving student debt relief claims

Education Secretary Betsy DeVos released a new formula for granting debt relief to borrowers defrauded by their colleges after a previous plan became mired in litigation. (Pablo Martinez Monsivais/AP)
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Education Secretary Betsy DeVos is doubling down on a controversial policy of granting partial debt relief to students defrauded by their colleges, despite ongoing legal challenges and a congressional inquiry.

On Tuesday, the Education Department released an updated methodology for processing loan forgiveness claims made under a statute known as borrower defense to repayment. It will continue to provide relief by comparing the wages of students in similar academic programs but now rely on publicly available data to avoid running afoul of privacy laws that brought the prior method to a halt.

“We cannot tolerate fraud in higher education, nor can we tolerate furiously giving away taxpayer money to those who have submitted a false claim or aren’t eligible for relief,” DeVos said in a statement Tuesday. “This new methodology treats students fairly and ensures that taxpayers who did not go to college or who faithfully paid off their student loans do not shoulder student loan costs for those who didn’t suffer harm.”

Higher-education experts warn the new formula could result in substantially less loan cancellation than the previous plan. It compares median earnings of graduates who have made debt relief claims with those of graduates from comparable programs. The bigger the difference, the more relief an applicant will receive.

Full loan forgiveness will be provided only to defrauded students who attended a program in which graduates earn the least amount of money compared with their peers across the country. The policy is a stark contrast from the Obama administration’s practice of granting full relief when it determined a college committed fraud.

A federal judge in May 2018 blocked DeVos’s first attempt to cancel only a portion of the debt amassed by a group of former Corinthian Colleges students, ruling that the department violated federal laws in the way it used earnings data from the Social Security Administration. The case resulted in DeVos being held in contempt Oct. 24 for violating a court order to stop collecting loan payments from former students of the defunct for-profit chain.

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The Trump administration has argued that the Corinthian case has prevented the Education Department from issuing decisions on the 227,000 claims filed by borrowers — most of whom attended for-profit colleges. The new methodology will not apply to students in the Corinthian lawsuit because Magistrate Judge Sallie Kim of the U.S. District Court for the Northern District of California must approve any new relief formula applied to the group.

House Democrats are investigating the administration’s refusal to take action on claims and for its push to limit debt cancellation. DeVos is scheduled to testify before the House Education Committee on Thursday after Chairman Robert C. “Bobby” Scott (D-Va.) threatened to subpoena her for documents detailing the department’s handling of the claims.

“The Department of Education has the clear authority to provide full debt relief to students defrauded by their college,” Scott said in a statement Tuesday. “Rather than simply exercising that authority and providing life-changing relief to defrauded borrowers, the Department is inventing another scheme to provide students less relief than the law allows.”

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The secretary is losing the support of some White House officials who say she has not done enough to advance a vision for the administration, according to administration officials who spoke to The Washington Post on the condition of anonymity. Some in the White House blame DeVos for court defeats, including the contempt finding.

DeVos could create more headaches for herself and for the department with her latest effort to limit student debt forgiveness to defrauded borrowers because the plan could result in further litigation.

The Project on Predatory Student Lending at Harvard University, a legal aid group representing the Corinthian students, has argued that any partial relief formula is illegal under the 1995 debt relief statute that entitles defrauded students to full loan cancellation. Toby Merrill, director at the Project on Predatory Student Lending, said the formula is also an arbitrary way to grant loan forgiveness.

“It still has the same problem of geographic incoherence, timing incoherence,” Merrill said. “What people earn all over the country is so different, so these averages are just going to produce statistically, mathematically nonsensical results as applied to individuals, and really don’t measure the harm they’ve endured.”