Student Borrowers to Judge: Department of Education Can’t be Trusted to Process Borrower Defense Claims Fairly | Press Release

October 1, 2020

More than 500 Student Borrowers Attended Fairness Hearing to Address Borrower Defense Settlement and Blanket Denials

 

BOSTON – A federal judge today heard from student borrowers at a fairness hearing on the proposed settlement between students and the United States Department of Education that forces the Department to process all pending borrower defense claims.

The public hearing was held via Zoom, by the United States District Court for the Northern District of California.  More than 500 students attended the hearing, more than 200 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.

Student borrowers filed a motion in federal court two weeks ago asking for final approval of the settlement, while also asking the judge to enforce the terms of the settlement that parties agreed to. The borrowers argued that the Department has already breached the settlement agreement, signed in April, by issuing cursory, blanket denials of nearly all of the borrower defense claims it has decided.

The fourteen speakers gave passionate and at times emotional testimony on how their schools, and their subsequent mistreatment at the hands of the Department of Education, has affected their lives, their careers, and their families.

“Betsy DeVos and the Department of Education should apologize to students, plaintiffs, and the court for treating this lawsuit like a joke,” said class member Hugh McGinley. “The Department has had plenty of time to address all of the claims, but instead used that time to ignore students and bend the rules to help for-profit schools.”

“The predators at these schools have taken advantage of students, and we are entitled to a fair and thorough review of our claims,” added Kishan Redding.

The message from borrowers, whether they approved of or disapproved of the settlement, was clear: they do not have confidence that the Department of Education is capable of issuing fair and reasoned decisions, in part because of the unlawful blanket adjudication notices it has issued.

“As student borrowers expressed loud and clear today, they do not trust the Department of Education to process their borrower defense claims fairly and according to the law,” said Eileen Connor, Legal Director at the Project on Predatory Student Lending. “Today over 500 students heard from each other and recognized many were given the same denial, word-for-word, regardless of where or which school they attended. Issuing sweeping, blanket denials to students is a direct violation of the agreement. As representatives of the class, the settlement that students and the Department agreed to is fair and acceptable to borrowers only if it is executed in good faith.”

The judge expressed concern that the Department of Education has issued thousands of blanket denials since the settlement agreement was filed in April. The court focused in on the fact that some borrowers have been denied relief despite public enforcement actions finding wrongdoing at their schools. The students highlighted this issue in their motion for a preliminary status conference and motion to enforce the settlement.  The judge did not make a final decision on whether to approve the settlement today.

 

Case Background:

Over the past several decades, millions of students borrowed federal student loans to attend various for-profit colleges, including ITT Technical Institute, Corinthian Colleges, the Art Institutes, Salter College, and Brooks Institute of Photography. This industry falsely promises students high-paying jobs, state-of-the-art vocational training, and meaningful careers.

Between 2015 and 2019, over 200,000 former students have asserted their right under federal law to discharge their federal student loans due to their schools’ misconduct. As it was legally obligated to do, the Department of Education started to adjudicate these borrower defenses, approving nearly 28,000 borrower defenses in the six-month period before January 20, 2017.

Then, under Secretary DeVos, the Department of Education refused to adjudicate any borrower defense claims for well over a year, and stopped the processing of borrower defense applications.

The Department of Education’s decision to keep these students in limbo has further destroyed students’ credit and limited their access to federal student aid. For students who have defaulted on their loans, the Department of Education has invoked its extraordinary powers to garnish their wages or seize their tax refunds (for many, their Earned Income Tax Credit).

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 – with96% 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.

This lawsuit builds on other cases that hold the Department of Education accountable to students in court. In Williams v. King, Everest students fought back against the Department of Education stealing their tax refunds, and won. In Calvillo Manriquez v. DeVos, Corinthian students stopped the Department from going back on its decision to discharge their loans completely. And in Bauer v. DeVos, two former Art Institutes students forced the Department to implement the 2016 Borrower Defense rule. In August 2019, Secretary DeVos issued a new borrower defense rule imposing near-impossible standards for loan discharge; in February 2020, the Project challenged the new rule in court.

 

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.