The Project on Predatory Student Lending represents students in their efforts to assert their rights against predatory for-profit colleges and the Department of Education, which chooses to enable these companies rather than defend students. We bring cases that can change this corrupted system and address the policies and issues that keep this predatory industry alive.
Borrowers who have been cheated due to their school’s misconduct are eligible to have their federal student loans cancelled. This is a right that is protected in federal law, common law, and student loan contracts. The Department of Education has the power and legal obligation to cancel those loans today, but it refuses. Instead, the Department tries to ignore borrowers’ rights, rewrite history, and flout court orders in our cases.
The Department has long recognized that borrowers must be able to cancel loans based on school misconduct. When federal student loans were made by private banks under the Federal Family Education Loan (FFEL) Program, lenders were required to agree that loans made to students of for-profit schools were subject to borrower defense cancellation in order to have their loans covered by a federal guarantee. The Department of Education said it is “consistent with federal policy for banks to bear the financial consequences of school misconduct.”
But in August 2019, the Department released new borrower defense regulations, gutting fair, basic, and needed protections for hundreds of thousands of student borrowers who were defrauded by for-profit colleges. The rule imposes impossible burdens on defrauded borrowers, including a three-year time limit to apply, and requiring a litany of evidence including proof of financial harm beyond the federal loan itself.
Today, the government IS the bank. It is responsible for ensuring that schools comply with applicable laws, including laws that prohibit consumer fraud. It can’t ignore serious school misconduct when collecting the student loan debts it had responsibility for creating. But that is just what it is doing.
It is clear that the Department of Education has no intention of following the law and cancelling these fraudulent debts. It has failed to approve a single borrower defense application for federal student loan relief since 2018.
More than 158,000 students who have applied for debt cancellation are waiting to hear from the government. They have been struggling with the financial and emotional burden of a massive debt that they never should have had. Yet the Department continues to ignore students, and ignore its own obligation to cancel these fraudulent debts.
For-Profit Colleges and Racial Justice
The tax payer-funded for-profit college industry specifically targets students of color with aggressive and manipulative advertising tactics. Black and Latino students are disproportionately harmed. The debt associated with for-profit colleges is not only predatory, but racist. Click below to learn more about for-profit colleges and racial justice.
In May 2018, a major court ruling stopped the Department of Education from partially denying loan cancellation to certain students who attended Corinthian Colleges (Heald, Everest, and WyoTech) and ordered the Department of Education to stop collecting on the loans of the subset of those students who have applied for borrower defense loan cancellation.
Still, the Department of Education continues to argue against granting full and complete loan cancellation to people who were cheated by the for-profit college and has appealed the decision to a higher court.
The Department should be holding sham schools accountable, not fighting to make those who were cheated pay even more.
That’s why we will continue calling on the Department to do the right thing and cancel all Corinthian debt. So will our friends and partners.
Mary is a single mom who entered the Medical Assistant program at Everest Institute. The quality of the program was horrible. The students were forced to practice on themselves. One time, a student practiced drawing blood from Mary but due to a lack of training from the program, forgot to take the tourniquet out before the needle, and Mary’s blood spilled everywhere. Mary had to abandon the program. Shortly thereafter, she couldn’t find a job, lost her apartment, and lived in a shelter for two years. She never got a medical job, and is now a domestic violence case manager. She is in default on her $7000 in student loans from Everest Institute.
Christine left high school at age 15 when she had a child. After enrolling in community college, she was drawn into Everest with the promise that she would get a job as a medical technician more quickly at Everest than if she remained at community college. Had she stayed at community college, she would have graduated debt-free. Instead, she has tens of thousands of dollars in student loans. She has managed to find work outside the medical field earning minimum wage, but these wages are being garnished because she fell behind on her student loan payments. She’s currently living in a shelter with her daughter, and had planned to use her tax refund as security deposit on an apartment. Instead, this money was seized by the government to pay for her debt to this fraudulent “school.”
Tina attended a Medical Assisting program at Sanford-Brown Institute (SBI), relying on SBI’s promises that its graduates had high rates of employment in their field of study; that SBI would provide meaningful job placement assistance; and that SBI’s credits were widely transferrable to legitimate higher education institutions. Only after incurring substantial student loan debt and graduating with a 4.0 grade point average, despite a period of homelessness, did Tina learn that all of these promises were false. After graduation, the only employment Tina could find was a part-time retail job paying little more than minimum wage, where she worked for almost four years to make ends meet. Tina is rightfully proud of her perseverance in obtaining her degree, but feels that in all practical senses, her degree is worthless.
Comments from the Legal Aid Community on the Proposed Borrower Defense Rule
California Attorney General's Letter to Secretary DeVos Re: Notice of Proposed Rulemaking on Borrower Defense
Preliminary comment to the Notice of Proposed Rulemaking (NPRM) published on July 31, 2018
See All Policy Positions