Pratt v. Cardona

Case Outcome

The lawsuit was voluntarily dismissed after the U.S. Department of Education agreed in March 2021 to end the previous administration’s unlawful partial relief policy for adjudicating borrower defense applications. The department further agreed to grant borrowers who were impacted by that policy the full debt relief they are owed.

All affected borrowers received notice of 100% relief on their approved borrower defense applications by September 2021. Borrowers have been informed that loans in the federal direct loan program related to their approved claims will be discharged by March 2022. Borrowers with other types of federal loans, such as Federal Family Education Loans (FFEL) or Perkins Loans, will also receive a full discharge on those loans, but the Department states that additional steps are needed and borrowers should await further directions on how to obtain relief. The Department further states that it is reviewing borrowers’ eligibility for a refund on payments already made on loans that have been approved for borrower defense relief. All approved loans will remain in forbearance and stopped collections status until discharge is completed.

The Project continues to monitor the Department’s progress in completing discharges as promised.

Overview

Who Is Involved In This Case?

Student borrowers filed this case against the U.S. Department of Education. They seek to represent all borrowers who have had or will have the Department of Education’s partial relief rule applied to them. The students are represented by the Project on Predatory Student Lending and Public Citizen Litigation Group.

 

What Is This Case About?

This case challenges the partial relief methodology for borrower defense introduced by the Department of Education in December 2019. The partial relief rule applies to people whose borrower defense applications are granted because their school cheated them. Under the rule, the Department only cancels a small part of most people’s loans, and forces them to repay significant portions of their bogus student loan debt.

The rule uses a deeply flawed methodology, basing relief only on the average earnings of graduates of the applicant’s program, rather than considering any evidence of the harm suffered by students from their schools’ misconduct.

This is the Department’s second attempt at devising a “partial relief” methodology that denies most relief to defrauded student borrowers. The first rule was enjoined in May 2018 after a federal court concluded that the Department had violated a federal law called the Privacy Act in creating its partial relief formula. A judge ordered the Department to stop using the formula and to stop collections on all class members. However, the Department failed to comply with this order, and collected on over 45,000 borrowers, which landed Secretary DeVos in contempt of court with a $100,000 fine.

This lawsuit follows a recently-proposed settlement in the lawsuit Sweet v. DeVos, in which the Department agreed to finally begin deciding the borrower defense claims of nearly 200,000 student borrowers who were cheated by their schools and have been waiting for relief.

 

Where and When Was This Case Filed?

This case was filed in the United States District Court for the District of Columbia on June 9, 2020.

“The Department of Education recognizes that I was defrauded by this school, but because of a ridiculous formula, I only get 10% relief. It’s insulting. I have worked hard to succeed despite all the harm that Everest caused to my life and career. I am not looking for a handout. I just want accountability and a process that is fair for everyone”

- Sammia Pratt, lead plaintiff in Pratt v. Cardona

Why This Case?

Federal law allows students to cancel their federal student loans when the school they attended misled them. Since taking office, Secretary DeVos has made multiple failed attempts to subvert this law and block loan cancellation for students.

The Department’s most recent attempt at “partial relief” is another scheme to deny loan cancellation to defrauded students. When borrowers apply for relief, they must answer questions about how their school’s actions harmed them. Instead of evaluating the information that students have submitted, under this new rule, the Department ignores the evidence and is using “average” earnings of all graduates of the borrower’s program to determine the amount of relief available to every successful applicant who attended that program.

The Department claims its formula is based on statistics, but ignores basic statistical principles. The Department claims its formula measures value, but calculates the value of an education solely on a cohort’s earning ability. Moreover, the formula does not take into account the countless factors that go into a cohort’s earnings, many of which have nothing to do with the education that students received from predatory schools.

Case Updates

Student Borrowers Harmed by Dept. of Education’s Unlawful Partial Relief Scheme Drop Lawsuit After Dept. Abandons Policy | Press Release

Student borrowers in the class action lawsuit Pratt v. Cardona (previously Pratt v. DeVos) today moved to voluntarily dismiss the lawsuit, after the U.S. Department of Education agreed in March 2021 to end the previous administration’s unlawful partial relief policy for adjudicating borrower defense applications. T

What the Latest Student Debt Announcement from The Department of Education Means for Defrauded Borrowers | Blog

On March 18, 2021, the Department announced full debt cancellation for borrowers with partial relief decisions on their borrower defense applications. More than 90% of borrower defense applicants are not affected by the Education Department’s partial relief announcement because their applications were denied or because they are still waiting for a decision. Here’s what that means.

Statement on Education Department Rescinding Partial Relief Policy | Press Release

Today, the Department of Education rescinded its second partial relief policy. Its first was enjoined by a federal court in Calvillo Manriquez v. DeVos. This second policy has been challenged in Pratt v. DeVos. This policy was layered on top of the harmful 2019 borrower defense rules, and its repeal does not affect those rules.

Case Documents

Motion for Voluntary Dismissal

The U.S. Department of Education agreed in March 2021 to end the previous administration’s unlawful partial relief policy for adjudicating borrower defense applications.

Amended Complaint

Plaintiffs filed an Amended Complaint.

Complaint

Plaintiffs filed a Complaint against the Department of Education.

Coverage

A First Move on Borrower Defense | Inside Higher Ed

The Education Department announced yesterday that students who were cheated by for-profit institutions and previously granted partial relief on their direct federal loans will now be granted full relief. The department is rolling back a controversial formula — established under the previous secretary, Betsy DeVos — that gave some borrowers only partial debt forgiveness, even if it was found that they were defrauded or misled by their college.

Read More

Education Department Announces Plan it Claims Will Help Scammed Students Discharge School Debt | ABA Journal

A 2019 U.S. Department of Education policy on student debt discharge, which raised the burden of proof for applicants claiming that they were misled by their schools and put in place a plan that only granted partial relief for some, was rescinded Thursday.

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Is $10,000 In Student Loan Forgiveness Next, After Biden Administration Cancels $1 Billion? | Forbes

Yesterday, Education Secretary Miguel Cardona announced a policy shift that will result in $1 billion in student loan forgiveness. But what does that mean for the ongoing efforts by progressive lawmakers and consumer rights activists to convince President Biden to cancel student debt?

Read More