Judge Orders That Department of Education Cannot Resume Issuing Borrower Defense Denials Without Notifying Court and Borrowers | Press Release

November 23, 2020

Order impacts over 170,000 class members who spoke up for their rights to loan cancellation

BOSTON – A federal judge has ordered Education Secretary Betsy DeVos and the U.S Department of Education to notify the court two weeks before it denies any more borrower defense claims from student loan borrowers cheated by their school. The court had threatened to enjoin the agency from issuing borrower defense denials, which prompted the agency to stop “voluntarily.” The agency also promised the court that it would put all borrower defense applicants—even those whose applications it had summarily denied—back into forbearance until the litigation ends.

The ruling, in the case Sweet v. DeVos, makes it unlikely that any more students will have their borrower defense applications denied under Secretary DeVos. Regardless of whether a class member has received a denial notice, the Secretary has said that class members will not have any payments due until the court issues a final decision. The judge is also asking the Secretary to confirm whether interest will accrue during that time.

The decision follows an October 20 ruling in which Judge William Alsup slammed Secretary Devos’ blanket denials of students’ borrower defense claims and rejected a proposed settlement in the case. The judge is allowing the plaintiffs to take depositions of officials from the Department of Education. On October 30, class members asked the judge to issue an injunction to stop the Department from issuing any further denials, and to vacate the tens of thousands “potentially unlawful” denials that were sent to 94% of borrower defense applicants since June 2019.

Students in the case are represented by the Project on Predatory Student Lending and the Housing and Economic Rights Advocates (HERA).

“This order making sure that Secretary DeVos cannot continue issuing blanket denials at will is an important step for our clients, who have been ignored and abused by this administration,” said Project on Predatory Student Lending Director Toby Merrill. “This case has exposed the Department’s mistreatment of over 160,000 borrowers, and the judge’s order shows that their voices have been heard. These students and families were scammed by for-profit colleges and have been living in financial and emotional turmoil for up to half a decade while waiting on the Department to heed their claims. One thing is clear: these former students will no longer be ignored by their government. We look forward to the day when all cheated borrowers receive justice.”

“The fact that so many of us had the exact same form denial shows that they didn’t even look at our applications and the evidence of corruption at these schools. I’m glad that we had an opportunity to have our voices heard,” said Jennifer Lezan, a former student at the Art Institute of Chicago. “We don’t need to be forgiven for a school’s bad decision in putting profit in front of people and I’m going to keep fighting for that.”

Students spoke out in a dramatic fairness hearing in the case held on October 1, attended by 500 borrowers via Zoom. Before the hearing, more than 200 students sent in comments and requests to speak and fourteen spoke about the settlement and how the Department of Education has been acting in bad faith by issuing blanket denials without any consideration of their claims.

“Even after being ignored for years, I still always had faith that the government would ultimately do the right thing and not let students be defrauded, especially when faced with the mountain of evidence. Instead, we’ve been treated like we’re trying to get something we’re not owed when we’re just asking for justice,” said Rebekah Sanchez Norton, a former Brooks Institute of Photography student. “I couldn’t possibly convey the depth of how tragic this entire experience has been for my family. Finally getting these loans canceled would be life changing.”

 

Case Background:

Six students brought this lawsuit in June 2019. Immediately after filing the lawsuit, the students asked the court to let them represent all other former students whose claims for loan cancellation have stalled, with a motion for class certification. The motion included almost 900 affidavits from students describing the harm that the Department’s inaction has caused – with 96% saying their lives were made worse by attending school. In October 2019, the court certified the class of over 200,000 borrowers with pending claims. Many had been pending for more than four years.

The parties reached a settlement in April 2020 and received preliminary approval from the court in May 2020. The settlement agreement commits the Department to an 18-month timeline to issue a final decision on the more than 100,000 outstanding borrower defense claims, or else be required to cancel a portion of the borrowers’ student loans. However, since April, the Department has denied 94% of borrower defense claims without giving real reasons. On September 18, 2020, the students filed a motion asking for final approval of the settlement, while also asking the judge to enforce the terms of the settlement that the parties agreed to, and are entitled to, under the law.

On October 20, 2020, Judge William Alsup slammed Secretary Devos’ blanket denials of students’ borrower defense claims and rejected a proposed settlement in the case.  On October 30, 2020 class members asked the judge to issue an injunction to stop the Department from issuing any further denials, and to vacate the tens of thousands “potentially unlawful” denials that were sent to 94% of borrower defense applicants since June 2019.

For more information about Sweet v DeVos click here.

 

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.

About HERA

Housing and Economic Rights Advocates (HERA) is a California statewide, not-for-profit legal service and advocacy organization dedicated to helping Californians — particularly those most vulnerable — build a safe, sound financial future, free of discrimination and economic abuses, in all aspects of household financial concerns. It provides free legal services, consumer workshops, training for professionals and community organizing support, creates innovative solutions and engages in policy work locally, statewide and nationally.