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This press release was originally posted through Allied Progress. Allied Progress is now Accountable.US.

DeVos Still Dragging Feet on Student Loan Disability Discharge Issue

Washington D.C. – In a win for students and taxpayers alike, today the U.S. House passed a key resolution, H.J. Res. 76 (116), to overturn the Trump-DeVos Education Department’s rule gutting student borrower protections. The rule, advanced by Secretary Betsy DeVos in August 2019, made it next to impossible – apparently by design – for student borrowers who were scammed by shady colleges to cancel their loans and receive full restitution. Today’s resolution, under powers outlined in the Congressional Review Act (CRA), also restores the 2016 “Borrower Defense to Repayment” rule, an Obama-era protection that provides a path to debt forgiveness for students ripped off by predatory higher-ed institutions, oftentimes for-profit colleges. Consumer watchdog group Allied Progress called on the U.S. Senate to follow the House’s lead and quickly pass the CRA resolution to make things right for current and future student borrowers who fall victim to abuse.

By the Education Department’s own estimates, the DeVos rule shortchanges fraud victims by over $500 million compared to the current Obama-era protections — a boon to the for-profit college industry that has given over $8 million to Republican campaigns. The original Obama Borrower Defense Rule was projected to recoup over $17 billion in losses for harmed students by 2020, and was designed to protect taxpayers by “requiring institutions to put up collateral when they’re at risk of closure.”

“The Senate now faces a choice: either join the House in ensuring defrauded student borrowers are made whole — or rubberstamp the Trump administration’s scheme to protect the profits of crooked diploma mills. It’s that simple,” said Derek Martin, Director or Allied Progress. “The Senate must decide whether they stand with the students who were robbed of the quality education they deserve — or with the ‘most unpopular person in our government,’ Secretary DeVos, who has abandoned her responsibility to protect students from financial harm.” 

Added Martin: “Secretary DeVos claims her unreasonable requirements for student debt relief are about saving taxpayer money. But if she were serious, the Secretary wouldn’t have systematically let the for-profit college industry off the hook for bad behavior, which only invites more and more borrower defense claims.” 

WHAT YOU NEED TO KNOW:

Betsy DeVos Sold Out To For Profit Colleges On Borrower Defense

In August 2019, DeVos Announced Her Overhaul Of The Borrower Defense Rules, Weakening The Protections Put In Place For Borrowers And Adding Hurdles For Defrauded Students That File For Loan Forgiveness.

In August 2019, Secretary DeVos Released Her Overhaul Of The Borrower Defense Rules, Making It “More Difficult” For Defrauded Borrowers To Get Their Debt Cancelled.

On August 30, 2019, Secretary DeVos Released Her Overhaul Of The Borrower Defense Rules Which Will “Make It More Difficult For Federal Student Loan Borrowers To Cancel Their Debt” If Their College Has “Defrauded Them.” “Education Secretary Betsy DeVos on Friday finalized rules that make it more difficult for federal student loan borrowers to cancel their debt on the grounds that their college defrauded them, scaling back an Obama-era policy aimed at abuses by for-profit colleges. […] The overhaul of the rules — called ‘borrower defense to repayment’ — is a response to conservative criticism that the current federal standards, set by the Obama administration, are too lenient and expensive for taxpayers.” [Michael Stratford, “DeVos tightens rules for forgiving student loans,” Politico, 08/30/19]

DeVos’ New Rule Will Decrease The Amount Of Loan Forgiveness By Over $500 Million Annually.

DeVos’ New Rule “Will Reduce The Amount Of Loan Forgiveness” By Over “$500 Million Each Year.”“The tighter standards will reduce the amount of loan forgiveness provided to students by more than $500 million each year compared to the amount under the current Obama-era policies, the department estimated. The entire package of regulations — which also curtails loan discharges for students whose schools suddenly close — is projected to save taxpayers more than $11 billion over the next decade.” [Michael Stratford, “DeVos tightens rules for forgiving student loans,” Politico, 08/30/19]

The Rule Will Make Students “Jump Through More Hoops” By Having To Prove Their School Knowingly Defrauded Such That It Caused “Financial Harm.”

The Borrower Defense Rules Will Make Students “Jump Through More Hoops” By Having “To Show Their School Engaged In Actions Or Made Statements “With Knowledge Of Its False, Misleading, Or Deceptive Nature Or With A Reckless Disregard For The Truth” That Caused “Financial Harm.” “The Trump administration is asking students to jump through more hoops than under existing rules. Borrowers will have to show their school engaged in actions or made statements “with knowledge of its false, misleading, or deceptive nature or with a reckless disregard for the truth.” Even if students convince the department that they were defrauded, they must still prove financial harm before loans are canceled.” [Danielle Douglas-Gabriel, “Trump administration sets higher hurdles for defrauded students to erase debt,”The Washington Post, 09/03/19]

The New Rules Will Give Students “Less Time To Apply For Relief” With Just “Three Years” Even Though “There Is Currently No Statute Of Limitation On Claims.”

The New Borrower Defense Rules Will Give Students “Less Time To Apply For Relief” With Just “Three Years” Even Though “There Is Currently No Statute Of Limitation On Claims.” “Borrowers will have less time to apply for relief — three years from graduation or withdrawal from college. There is currently no statute of limitation on claims filed by borrowers who have loan balances.” [Danielle Douglas-Gabriel, “Trump administration sets higher hurdles for defrauded students to erase debt,” The Washington Post, 09/03/19]

The Final Rule Also Permits Colleges To Use “Mandatory Arbitration Agreements” In Enrollment Agreements, Reversing A Ban Implemented By The Obama Administration.

The Final Rule Also “Allows Colleges To Resume Using Mandatory Arbitration Agreements In Their Enrollment Agreements With Students, Reversing An Obama-Era Ban.” “In addition, the final rule allows colleges to resume using mandatory arbitration agreements in their enrollment agreements with students, reversing an Obama-era ban on the practice, which was common at for-profit schools.” [Michael Stratford, “DeVos tightens rules for forgiving student loans,” Politico, 08/30/19]

The For-Profit College Industry Has Repeatedly Claimed In Corporate Filings That The Borrower Defense Rule Could Impose “Risks” And “Restrictions” On Their Business.

In 2016, Apollo Education Group, A For-Profit Education Company, Claimed That Proposed Borrower Defense Regulations “Could Result In Significant Potential Risks For Our Business” As “Student Loan Discharge” Due To Enforcement Could Bring “Potential Adverse Consequences.”

In A 2016 SEC Filing, Apollo Education Claimed That Proposed Borrower Defense Regulations “Could Result In Significant Potential Risks For Our Business” As “Student Loan Discharge” Due To Enforcement Could Bring “Potential Adverse Consequences.” “The proposed [borrower defense] regulations, if adopted, could result in significant potential risks for our business, since the precise standards for student loan discharge may be unclear or subject to interpretation in a manner that is adverse to us and not fully known or predictable in advance, and certain of the potential adverse consequences could arise from the mere commencement of enforcement actions by state or federal government entities, or the filing of student claims for debt relief, even if these actions and claims ultimately are found to lack merit.” [Apollo Education Group, Inc. 2016 Form 10-K, U.S. Securities and Exchange Commission, 10/20/16]

In 2019, Bridgepoint Education, A For-Profit Education Company, Claimed That “The Reinstatement” Of The 2016 Borrower Defense Rule Could Impose “Significant Restrictions On Us And Our Ability To Operate.”

In A 2019 SEC Filing, Bridgepoint Education Claimed That “The Reinstatement Of The 2016 Regulations Regarding Borrower Defense” Could Impose “Significant Restrictions On Us And Our Ability To Operate.” “The reinstatement of the 2016 regulations regarding borrower defense to repayment expand the circumstances in which students may assert a defense to repayment against an institution and provide that certain conditions or events could trigger, automatically or in some cases at the Department’s discretion, a requirement that an institution post a letter of credit or other security that could result in the imposition of significant restrictions on us and our ability to operate.” [Bridgepoint Education, Inc. 2018 Form 10-K, U.S. Securities and Exchange Commission, 03/12/19]

In 2019, Laureate Education, A For-Profit Education Company, Claimed That If It Had To Repay ED For “Successful” Borrower Defense Claims, It Could Have An Impact On Their “Business, Financial Conditions And Results Of Operations.”

In A 2019 SEC Filing, Laureate Education Claimed That If It Was “Required To Repay The DOE For Any Successful” Borrower Defense Claims, “It Could Materially Affect Our Business, Financial Conditions And Results Of Operations.” “We cannot state with any certainty the impact that complying with the 2016 DTR regulations might have on our business. If we are required to repay the DOE for any successful DTR claims by students who attended our U.S. Institutions, or if we are required to obtain additional letters of credit or increase our current letter of credit, it could materially affect our business, financial conditions and results of operations.” [Laureate Education Inc. Form 10-K, U.S. Securities and Exchange Commission, 02/28/19]

In October The Education Department Revealed That They Had Not Approved Or Denied Any Borrower Defense Claims In Over A Year, And The Number Of Backlogged Claims Had Reached 210K.

Over 200,000 Borrowers Are Waiting For The Education Department To Make A Decision On Their Borrower Defense Claims.

There Are Over “200,000 Borrowers” That “Are Waiting For The Education Department To Make A Decision On Their Application For Loan Forgiveness.” “The number of federal student loan borrowers who are waiting for the Education Department to make a decision on their application for loan forgiveness based on alleged fraud by their college now exceeds 200,000 borrowers, according to new federal data released today.” [Michael Stratford, “Backlog of student loan fraud claims tops 210K, with processing stalled,” Politico, 10/03/19]

As of October, The Education Department Had Not Approved Or Denied Any Borrower Defense Claim In Over A Year.

The Education Department Had “Not Approved Or Denied Any Claim In More Than A Year.” “The data also shows that the Trump administration’s adjudication of the claims remains stalled. The Education Department has not approved or denied any claim in more than a year.” [Michael Stratford, “Backlog of student loan fraud claims tops 210K, with processing stalled,” Politico, 10/03/19]

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