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Betsy DeVos should be forced to cancel loans for students at closed campuses, lawsuit says

A lawsuit asserts that Betsy DeVos’s Education Department is failing to cancel student loans for borrowers whose schools closed before students could earn their degrees. (Carolyn Kaster/AP)

A lawsuit filed Tuesday against Education Secretary Betsy DeVos asserts that the Education Department — as required by an Obama-era regulation — is failing to cancel student loans for borrowers whose schools closed before students could earn their degrees.

DeVos had sought to cancel the regulation, which governs the circumstances under which borrowers can have their debt erased. But a federal court last month said the regulation must take effect.

During the Obama administration, officials said that students should not be responsible for often-crushing debt when they did not get the education they were promised, sometimes bilked by for-profit schools and deceptive marketing. DeVos said that the rule made it too easy for students to cancel their debts and that she intended to replace it with her own version to take effect next year. That process fell behind schedule, and the earliest the new rule will begin is July 2020.

In the meantime, the federal court said, DeVos cannot simply ignore the version put in place by her predecessor.

Under one provision, the Obama rule directed the Education Department to proactively cancel debts of students whose schools closed before they received their degrees. It did not require that students apply for or request the cancellation.

The suit was filed Tuesday by Housing and Economic Rights Advocates, a nonprofit legal service and advocacy organization, in U.S. District Court for the Northern District of California. The housing group is represented by the National Student Legal Defense Network, which has challenged a series of DeVos moves.

The Education Department did not respond to a request for comment.

People who attended school on about 1,400 campuses that closed between November 2013 and November 2015 may be eligible for immediate debt cancellation, the legal network said. Students are eligible for the immediate relief if they have not re-enrolled within three years in another school that participates in the federal student loan program. So students in schools that closed after November 2015 are not yet eligible for the automatic debt relief.

The legal defense network estimated that if the rule were fully implemented, it would result in $250 million in canceled debt of tens of thousands of borrowers.

“The Department of Education seems determined to deny student borrowers the financial relief to which they are entitled,” said Aaron Ament, president of the network.