Education Department’s Student Loan Discharges Represent Only 6% of Unresolved Borrower Defense Claims | Press Release

February 16, 2022

“This piecemeal approach barely scratches the surface of President Biden’s borrower defense backlog. There are hundreds of thousands of defrauded borrowers who are equally owed cancellation and zero reason to make them wait any longer.”

 

BOSTONToday, the U.S. Department of Education announced that it will cancel $415 million in federal student loans for approximately 16,000 borrowers, including former students of the for-profit colleges ITT Tech, Corinthian Colleges, DeVry University, Westwood College, Marinello Schools of Beauty, and Minnesota School of Business/Globe University. The Department described its findings as “instances in which students were misled into loans at institutions or programs that could not deliver what they’d promised.”

The 16,000 borrowers included in today’s announcement are among the more than 260,000 borrowers who have unresolved borrower defense applications before the Department, representing just 6% of unresolved claims. The borrowers are represented by the Project on Predatory Student Lending in the class action lawsuit Sweet v. Cardona, which challenges the Department’s ongoing refusal to process their borrower defense claims.

The Project also represents 700,000 former ITT students in the ITT bankruptcy, Villalba et al v ITT. The bankruptcy court has recognized that all of these students were scammed by ITT and are the true creditors. Earlier today, the Project released a new report detailing the massive scale of fraud and abuse at ITT and is calling on the Department of Education to cancel all ITT loans — regardless of whether borrowers have filed a borrower defense claim, or which program they attended.

Today’s discharges also include the loans of 1,800 DeVry University borrowers, totaling $71.7 million and mark the first borrower defense discharges for a still currently operating school. The Department acknowledges that DeVry made “widespread substantial misrepresentations about its job placement rate,” yet the Department does not indicate that it will do anything to hold DeVry or its executives responsible for these deceptive practices. The Department states only that it will “seek to recoup the cost of the discharges.”

 

Statement from Eileen Connor, Director of the Project on Predatory Student Lending:

“It’s a testament to the ongoing pressure from our clients that the Department of Education has granted any borrower defense applications to date — and our clients won’t let up until the job is done.

However, this piecemeal approach barely scratches the surface of President Biden’s borrower defense backlog. To me, this announcement indicates that the Department lacks the courage to take bold action to correct past wrongs, and is instead doubling down on an incoherent approach. There are hundreds of thousands of defrauded borrowers who are equally owed loan cancellation and zero reason to make them wait any longer.

Borrowers were promised justice and accountability under a new administration, but are instead getting more of the same. Rather than learning from the lessons of ITT, a school that ripped off hundreds of thousands for over a decade, the Department is allowing schools like DeVry to continue to operate using ITT’s playbook. This is also a mixed message — the Department says it intends to recoup some of the canceled loan amounts from DeVry, while simultaneously sending the school Pell Grants and student loan money. This lack of accountability is hurting generations of students all under the government’s watch.

We are again calling on the Department to do what is right when it sees evidence of widespread fraud: cancel the loans.”

 

Borrower Defense by the Numbers:

  • There are over 260,000 unresolved borrower defense applications pending before the Department of Education.
    • As of 9/30/2021, the most recent reporting available, ED reported 87,747 pending borrower defense applications.
    • ED’s data also lists 45,782 applications as “adjudicated, pending notification.” It is unclear what these decisions are or why notice has not been sent.
    • There are about 128,000 applications that were denied using former Secretary DeVos’ unlawful form denial letters. These should all be treated as pending.
  • This means the 16,000 discharges granted today represent just 6% of the unresolved total of borrower defense claims.

 

The Project on Predatory Student Lending has represented more than one million former for-profit college students and won landmark cases against the Department of Education and predatory colleges.

 

About the Project on Predatory Student Lending

Established in 2012, the Project on Predatory Student Lending represents former students of predatory for-profit colleges. Its mission is to litigate to make it legally and financially impossible for federally-funded predatory schools to cheat students and taxpayers. The Project has brought a wide variety of cases on behalf of former students of for-profit colleges. It has sued the federal Department of Education for its failures to meet its legal obligation to police this industry and stop the perpetration and collection of fraudulent student loan debt.

 

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