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Consumer lawyers want to end Education Department’s partial student debt relief plan

The Project on Predatory Student Lending is suing Education Secretary Betsy DeVos and the Education Department over the use of earnings data to grant partial student debt relief. (Joe Raedle/Getty Images)

The Project on Predatory Student Lending at Harvard University, a legal services clinic, has asked a federal judge to stop Education Secretary Betsy DeVos and the Education Department from using earnings data to grant only partial student loan forgiveness to defrauded borrowers.

The motion for an injunction filed over the weekend stems from the department’s decision in December to provide debt relief to former students of Corinthian Colleges by comparing the average earnings of students in similar vocational programs. That earnings information is collected under gainful employment, a regulation that penalizes career-training programs for producing too many graduates with more debt than they can repay.

Project lawyers say the Education Department has no right to use the data, which is supplied by the Social Security Administration, for any purpose other than to evaluate vocational programs. And denying full relief to Corinthian students under the law is illegal, they argue.

Betsy DeVos takes action on backlog of student debt relief claims

“The Department of Education had already unfairly and unlawfully refused to cancel these bogus loans for so long,” said Joshua Rovenger, a lawyer at the Project. “Now, it has secretly and illegally co-opted Social Security data to try to argue for something less than the complete cancellation and refund that these borrowers are due.”

Rovenger is among several attorneys at the legal aid clinic leading a class-action lawsuit on behalf of former Corinthian students seeking a full discharge of their federal loans. The attorneys are working with Housing and Economic Rights Advocates, a legal aid group based in Oakland, on the case. The team amended its complaint and filed the motion for an injunction Saturday.

Corinthian closed in 2015 after the Education Department cut off its access to federal student aid for lying about its graduation and job placement rates. At the time, the for-profit chain was being investigated and sued by state and federal authorities for fraud, deceptive marketing and steering students into predatory loans. Despite the evidence against Corinthian unearthed by the Education Department, former students are still struggling to have their federal loans fully discharged.

A federal statute known as borrower defense to repayment gives the Education Department authority to discharge federal student loans when a college uses illegal tactics to persuade students to borrow money. Debt relief applications have piled up over the past year as the Trump administration refused to take action until education officials could fully review procedures instituted under President Barack Obama.

As pressure from lawmakers and consumer groups mounted, DeVos announced the approval of 12,900 applications for student loan forgiveness and denial of 8,600 claims from former Corinthian students in December. She said applicants would receive full loan forgiveness if their earnings are less than 50 percent of those of their peers. If their pay is at or above that threshold, the department would provide relief on a sliding scale.

Critics said the model will create more hardship for people who have been victimized by unscrupulous schools, robbing them of their legal right to have their federal loans fully discharged.

Elizabeth Warren wants the Education Dept.’s use of earnings data investigated

A group of congressional Democrats, led by Sen. Elizabeth Warren (Mass.), wrote DeVos about the matter after The Washington Post first reported the partial relief plan in October. They insisted that the department must publish a notice in the Federal Register and solicit public comment to change the purpose of the gainful employment data. They also said the agency is required to prepare reports for Congress on such a proposal. Months later, Warren asked the Education Department’s inspector general to investigate the use of the earnings data.

The Education Department has said that its partial relief plan is legal. Furthermore, the agency has said that the use of the earnings data is fully consistent with its agreement with the Social Security Administration. The Education Department did not immediately respond to requests for comment on the motion filed by the legal services project.

The Social Security Administration has said its general counsel is consulting with lawyers at the Education Department on the permissible use of data under their data exchange agreement. Yet in an email obtained by The Washington Post in December, the agency told a Democratic staff member that based on an “unofficial, non-legal, staff-level understanding . . . we do not believe [the Education Department] would be authorized to use earnings information we provide under any current agreement to make decisions about whether or not to grant debt relief to borrowers in certain vocations.”