Student Borrowers File New Brief in Lawsuit Regarding Borrower Defense Delays and Backlog | Press Release

February 24, 2022

Many Students Have Been Waiting Six or More Years; “The Department has not provided a straight answer as to why it continues to delay decisions on tens of thousands of borrower defense applications”

 

BOSTON – Today, student borrowers submitted a new filing in the lawsuit Sweet v. Cardona regarding the U.S. Education Department’s ongoing delays in processing borrower defense claims. The filing follows Judge William Alsup’s request for a status update as to what is taking so long to resolve the claims. Several borrowers have written directly to Judge Alsup in recent months seeking answers.

Borrowers filed the lawsuit in June 2019 (then Sweet v. DeVos), seeking to compel the Department to issue decisions on their borrower defense applications. Nearly three years later, only a small portion of borrower defense claims have been addressed and the backlog continues to grow.

In the filing, borrowers state that they do not know the reason for the delays, that the Education Department has repeatedly refused to answer their questions, and that the Department lacks transparency regarding the status of unresolved claims. The brief further states that the small portion of borrower defense claims the Department has decided, including last week’s announcement, have been insufficient. The 16,000 discharges announced last week represent just 6% of unresolved borrower defense claims.

“The Department has proven that it is capable of processing borrower defense claims and canceling debts when students are cheated by their schools, but this arbitrary, piecemeal approach only compounds the confusion and harm experienced by borrowers,” said Eileen Connor, Director of the Project on Predatory Student Lending. “Some of our clients have been waiting six or more years since filing their borrower defense applications, meanwhile the backlog of claims is higher now than when Trump left office. Secretary Cardona has all the evidence and legal ability he needs to cancel every one of these fraudulent debts and provide long overdue relief to hundreds of thousands of borrowers. He should do so immediately.”

Four borrowers who wrote to Judge Alsup detailed their experiences with the borrower defense process and expressed their frustration at the lack of action by the Department.

  • One borrower, a woman from Utah, attended DeVry University. She applied for borrower defense in 2017 and has not received any response to her application, despite the fact that she was deemed eligible for a restitution payment from DeVry under a false advertising settlement that the Federal Trade Commission reached with the university in 2016. She was told by the Department of Education’s Borrower Defense Hotline representative that her claim could not be reviewed because of this lawsuit, which is untrue. There is nothing stopping the Department of Education from lawfully deciding borrower defense claims while this lawsuit is pending.
  • Another borrower, a man from Pennsylvania, attended the University of Phoenix. He applied for borrower defense in 2017 and has not received any response to his application. The Department of Education has never granted any borrower defense applications from University of Phoenix borrowers, despite the school’s long and public track record of wrongdoing.
  • A third borrower attended Villanova Law School. He applied for borrower defense in 2016 and included in his application evidence of the American Bar Association’s findings against Villanova for making misrepresentations. He has not received any response to his application.
  • The fourth borrower, a father from Texas, took out a federal loan to pay for his son to attend Collins College, a Career Education Corporation school. The father applied for borrower defense in 2016 and received a form denial notice in 2020—a notice that, as the plaintiffs have alleged in this lawsuit, violated the law. He has not received any response to his request for reconsideration of the denial notice.

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 that last week’s 16,000 discharges granted represent just 6% of the unresolved total of borrower defense claims.

 

Case Background:

Six students brought this lawsuit against then-Secretary DeVos’ Department of Education in June 2019. At the time, the Department of Education had halted all processing of borrower defense claims, refused to adjudicate any borrower defense from any student for well over a year, and ordered the office of Federal Student Aid to stop processing borrower defense applications.

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 five years.

After a proposed settlement agreement was filed in spring of 2020, the Department of Education sent out tens of thousands of blanket denials of borrower defense claims. Many of these form letters denied relief due to a “lack of evidence,” despite the extensive evidence submitted, even in cases where other government enforcement agencies had found fraud. After a historic hearing held on Zoom and attended by over 500 student borrowers in fall of 2020, the judge found the Department of Education was not acting in good faith by sending out blanket denials and rejected the proposed settlement.

The judge also ordered discovery, allowing lawyers for the student borrowers in this case to obtain documents and to depose officials at the Department of Education. A review of these documents and depositions revealed alarming evidence that the U.S. Department of Education created a sham process designed to deny borrowers debt relief regardless of evidence. In March 2021, student borrowers filed a supplemental complaint citing this new evidence.

In February 2022, the U.S. Court of Appeals for the Ninth Circuit overruled the district court’s order allowing the student borrowers to depose former Secretary DeVos. Since then, Judge Alsup has set a schedule to move the case to resolution, with a trial to be conducted in July if necessary.

The borrowers are represented by the Project on Predatory Student Lending and Housing and Economic Rights Advocates (HERA).

 

About the Project on Predatory Student Lending

Established in 2012, the Project on Predatory Student Lending represents more than one million 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.

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