Updated Complaint: Education Department Officials Secretly Rigged Process to Deny Borrower Defense Applications for Debt Relief | Press Release

March 19, 2021

New evidence unveiled in lawsuit Sweet v. Cardona shows a sham process set up to deny defrauded borrowers debt relief regardless of the merits of their application


BOSTON – Student borrowers today filed a supplemental complaint in the lawsuit Sweet v. Cardona (formerly Sweet v. DeVos), citing alarming new evidence that the U.S. Department of Education not only illegally delayed processing borrower defense claims, but created a sham process designed to deny borrowers debt relief regardless of evidence.


The new facts came to light after Judge William Alsup slammed former Education Secretary DeVos’ blanket denials and acknowledged that the Department was acting in bad faith. Judge Alsup ordered discovery, including allowing lawyers for the 170,000 student borrowers to obtain documents and to depose officials including Under Secretary Diane Auer Jones, former Federal Student Aid COOs Mark Brown and Jim Manning, and Colleen Nevin, director of the Borrower Defense Unit. Those depositions and documents show:

  • Non-public orders to stop the claims process. In 2019, this lawsuit first challenged the government’s inaction and refusal to adjudicate nearly 200,000 borrower defense claims. The government denied having any policy of non-adjudication. Now, the Department’s internal memos, produced in discovery, show top Department officials directing staff to stop processing any claims, showing the delay was real and intentional. The delay order was approved by then-Secretary DeVos.
  • Non-public memoranda directing mass denials. Internal memos and procedures dictate that claims of borrowers from all but a handful of specific schools during limited periods of time would be denied, regardless of the nature of the claim, common evidence that the Department knew about, or evidence submitted by borrowers themselves. Hundreds of school-specific memoranda show that the Department created a process that made it seem like borrowers had a fair shot, but in effect, denials were a foregone conclusion.
  • Quotas that encourage denials. The Department created quotas that functionally required reviewers to deny claims. Reviewers needed to complete a certain number of claims per hour and per week. But since there were no approval procedures in place, the only way to complete a claim was to deny it. A recommendation for approval or further investigation of a claim would not count toward the quota required for the reviewer to keep their job.
  • Nonexistent reconsideration process. Despite denial letters saying that applicants may submit their claims for reconsideration, top officials admitted under oath that there is no process in place for reconsideration of denied borrower defense applications.
  • Disregarding borrower testimony and evidence, while misleading borrowers about whether “attachments” are necessary. Although the Department’s borrower defense application form did not require borrowers to attach documents, Department policy is to deny claims that do not include attachments. The form says that students “may” attach additional documents but are “not required to submit” them. And, no matter how many borrowers said the same thing, that evidence was discounted, despite that borrowers attest to the truthfulness of the application’s contents, an earlier policy of crediting repeated borrower claims.


For more details on the specific evidence and to view the documents, click here.


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


“This evidence has unveiled an ugly truth: that the US government deliberately implemented a rigged process which has led borrowers down a road that dead-ends in denials no matter the claim or the evidence,” said Eileen Connor, Legal Director for the Project on Predatory Student Lending. “The previous administration had a track record of hostility toward student borrowers, and despite the change in administration, these same procedures are still in place today. Secretary Cardona and the Biden-Harris administration must act immediately to correct the harm to the hundreds of thousands of defrauded borrowers who have been waiting for justice, many for more than five years. The time to take action is yesterday.”


“Nearly 200,000 defrauded students are still waiting for justice, due in no small part to the malicious efforts of Betsy DeVos and the for-profit education lackeys with which she surrounded herself as Secretary of Education. She utterly failed in her duty to protect students from harm and to hold scam schools accountable,” said Theresa Sweet, a plaintiff in the lawsuit and former student at the Brooks Institute of Photography. “For those of us who have been waiting for years for an answer, to those whose applications were denied without reason, the effects have been disastrous. Lives, families, and futures have been put on hold or ruined. Justice delayed is justice denied- most of us have been waiting for someone to do the right thing for far longer than the couple of years since this lawsuit was filed. It is well within the power of the Biden administration to remedy this situation. Do not make us wait any longer for justice.”


“Defrauded borrowers who have been waiting years to hear back about their claims are now finding out the Department was spending its efforts to ensure relief was all but impossible. These borrowers deserve justice, and the Department must act now to reverse course,” said Claire Torchiana, Equal Justice Works Fellow at Housing and Economic Rights Advocates.



 Borrower Defense since 2019

According to the latest data reported, the vast majority of borrower defense applicants have either had their applications denied or haven’t received a decision yet. Over 128,000 borrowers have been subject to an unfair process that remains in place regardless of any changes to student debt formulas.

    • Denial Rate Since December 2019: 90.4%
    • Applications Approved Under 2019 Partial Relief Formula: 13,572
    • Applications Denied With Inadequate Form Denial Notices: 128,316
    • Applications With No Decision Sent: 128,003
    • Applications Subject to 2019 Partial Relief Formula as a Percentage of All Decided + Pending since Dec. 2019: 5%


Impact of COVID-19 on Class Members

Members of the Sweet class have been made particularly vulnerable during the current COVID-19 pandemic and related economic downturn. A March 2021 survey over 425 class members revealed:

    • 18% are currently unemployed and over a third (34%) applied for unemployment benefits in the past year.
    • They (or a member of their household) are healthcare workers (24%) or other kinds of essential and frontline workers (47%)including postal workers, transit workers, delivery drivers, public safety workers, and restaurant workers.
    • They have been unable to qualify for loans (39%), been denied housing (19%), and disqualified from jobs (10%) all because of their student loan debt.
    • 96% of respondents would be immediately helped by student loan cancellation through borrower defense.


To read the documents filed with the supplemental complaint, click here.

For additional background and information about Sweet v. Cardona, 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.