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DeVos sued again over stalled loan forgiveness program

June 25, 2019
Former students at for-profit colleges say the education department has refused to take action on their applications for loan forgiveness.

Defrauded former students who attended for-profit colleges have filed a class-actoion lawsuit to force the U.S. Department of Education and Secretary Betsy DeVos to follow existing law and provide the students with debt relief.

The Project on Predatory Lending says it filed the suit in San Francisco on behalf of more than 158,000 former students who have sought debt relief through the government's loan cancellation program.

The suit argues that the education department has abdicated its responsibility by refusing to adjudicate the claims of defrauded students.

"The Department has intentionally adopted a policy of inaction and obfuscation," the lawsuit contends.

CNN reports that some borrowers have been waiting years to hear whether they'll be granted debt relief.

"Department officials have not offered a timetable for reviewing these applications," says Eileen Connor, legal director at the Project on Predatory Student Lending. "It's becoming very clear that they're not treating them in good faith."

After DeVos became education secretary in 2017, the department stopped processing claims. DeVos says she wants to rewrite the rule that allows defrauded students to seek loan forgiveness.

But a federal judge—siding with attorneys general from 18 states and the District of Columbia—ruled last year that DeVos' freeze was "arbitrary and capricious" and ordered the department to end the freeze.

Despite the ruling, Connor says there's been no indication that the department has started to review claims again.

Under existing law, students and former students are eligible for federal loan cancellation if the college misled the students or violated state laws relating to the students’ education, the Project says.

Since 2015, more than 200,000 former students have asserted their right to a complete discharge of their federal student loans because of their schools’ misconduct. In the last six months of the Obama administration, the Department of Education approved nearly 28,000 applications. The process was halted when DeVos became secretary.

"The department’s affirmative decision to keep these students in limbo—some for over four years—has destroyed students’ credit and limited their access to federal student aid," the Project says. "For students who have defaulted on their loans, the Department of Education has invoked extraordinary extrajudicial powers to garnish their wages or seize their tax credits."

DeVos has called the rule, known as Borrower Defense to Repayment, "bad policy." She's proposed offering partial loan forgiveness for qualifying students, based on the income of their peers who attended similar programs at other colleges. The plan would save the government $12.7 billion over a 10-year period compared with the Obama version, the department says.

Department officials have argued that they cannot process claims while another lawsuit is ongoing. The agency also has been sued over the proposal to offer partial forgiveness.

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