Senate Democrats are urging Education Secretary Betsy DeVos to forgive the federal student loans of borrowers who were defrauded by their colleges, as the number of debt relief claims at the Education Department grows.
The Washington Post reported in October that there are more than 87,000 applications for debt relief pending at the department, according to people within the agency who were not authorized to speak publicly. The agency has the authority to discharge federal student loans when a college uses illegal tactics to persuade a student to borrow money to attend, but not a single application has been approved since the Trump administration took office. Now lawmakers are demanding action.
“When a predatory college breaks the law to trick students into enrolling, those students are entitled to have their federal student loans canceled to help them start over,” said Sen. Elizabeth Warren (D-Mass). “Betsy DeVos’s outright refusal to help these students is taking a serious toll on their lives. Enough is enough — it’s time for Betsy DeVos to step up and do the right thing.”
On Tuesday, Warren and Sen. Richard J. Durbin (D-Ill.) released a report examining the backlog of debt relief claims under the federal statute known as borrower defense to repayment. The report includes accounts from applicants awaiting a decision and recommendations for expediting a process that has dragged on over two administrations.
The Education Department did not immediately respond to requests for comment.
Borrower defense, which dates to the 1990s, has become the last resort for many former students of defunct for-profit schools ITT Technical Institutes and Corinthian Colleges. The schools spent their last few years enveloped in state and federal lawsuits over alleged fraud, deceptive marketing and steering students into predatory loans. But the evidence in those cases did not create a clear path to loan discharge as consumer advocates had hoped.
Applicants have instead endured a long wait that for many started under the Obama administration. Obama officials granted relief to Corinthian students in waves, with the vast majority of approvals issued at the tail end of the administration. Advocates and lawmakers criticized the department for the slow-going process, but had hoped the momentum would continue under Trump.
Instead, the Trump administration has allowed tens of thousands claims to pile up at the department without a single approval or denial in 10 months. It has failed to discharge the loans of some borrowers whose claims were approved before the department changed hands, according to the report. People familiar with the matter have told The Post there are at least 10,000 claims that have been recommended for approval, but department officials refuse to move forward as they contemplate ways to grant partial debt relief.
Durbin and Warren are imploring the department to abandon the partial forgiveness plan and provide full discharges to people whose claims have been approved. They are also asking DeVos to use evidence obtained by state attorneys general to provide group discharges to former Corinthian and ITT students.
“The widespread fraud committed by Corinthian Colleges and ITT Tech wreaked havoc on the lives of tens of thousands of students nationwide, leaving them with high levels of debt, poor job prospects, useless degrees and credentials and in many cases no degree at all,” said Durbin, who along with 13 other senators wrote DeVos on Tuesday urging her to take action. “We can’t leave these students holding the bag.”
Tuesday’s report arrives as a committee convened this week to rewrite the borrower defense statute, a year after the Obama administration revised the rule to simplify the claims process and shift more of the cost of discharging loans onto schools. DeVos suspended the changes before they were scheduled to take effect in July and announced plans to overhaul the law.
To give the committee more time, the secretary is proposing delaying the revisions by another year. Her critics say DeVos is siding with for-profit colleges, which have complained that the Obama-era overhaul of the statute unfairly targeted their sector. A recent report by the Century Foundation, a liberal think tank, found more than 98 percent of the borrower defense claims the department had received were from people who attended for-profit colleges.