Last Thursday, March 18, 2021, Education Secretary Miguel Cardona rescinded a policy devised by his predecessor, Betsy DeVos, for processing complaints by students who claimed to have been defrauded by unscrupulous for-profit colleges and trade schools. DeVos’s policy denied debt relief for thousands of students whose complaints were not carefully or fairly considered.
The U.S. Department of Education manages an enormous higher education loan program which has been criticized by borrowers and members of Congress alike—all concerned that under former Education Secretary Betsy DeVos, student borrowers were left unprotected after for-profit colleges and trade schools induced them to take out big loans for shoddy education programs. Because these institutions are highly dependent on federal student loans to cover their operating expenses, they too frequently prey on students and military veterans with fraudulent advertising about the nature and quality of the programs to which they lure students. A federal rule called “the borrower defense to repayment” is supposed to protect students by cancelling their student loans when the students can prove the schools’ promises were fraudulent.
The Washington Post‘s Danielle Douglas-Gabriel explains the significance of Cardona’s action last week: “About 72,000 people will have their federal loans canceled after Education Secretary Miguel Cardona… scrapped a plan to give partial debt relief to students defrauded by their colleges, ending a controversial policy instituted by his predecessor Betsy DeVos. The move… amounts to roughly $1 billion in debt relief. But it only addresses a subset of the nearly 200,000 people who have filed claims in the last six years under… ‘borrower defense to repayment.'”
Inside Higher Education‘s Lilah Burke reviews DeVos’s widely criticized scheme for calculating how students’ debt could be erased once adjudicators determined they had been defrauded: “(I)f a borrower’s claim that they were cheated was accepted, the Education Department determined loan relief based on a formula. If a borrower’s earnings after graduation were two standard deviations below the median for similar programs, the department granted the borrower full relief. If the borrower’s earnings were below the median, but not by two standard deviations, the department granted 25, 50, or 75 percent relief. Under the Obama administration, the department recommended full relief for borrowers that attended the (now closed) for-profit chains Corinthian College and ITT Technical Institute. DeVos said the policies were too generous with taxpayer money and debuted the formula in December 2019.”
Now under Secretary Cardona’s leadership, Douglas-Gabriel reports: “(T)he department will revive the Obama-era policy. Borrowers whose claims have been approved, including those who previously received partial loan relief, will have a path to a full loan discharge. The department will reimburse any amounts paid on the loans, request credit bureaus to remove negative reporting tied to the debt and reinstate federal aid eligibility…. Eligible borrowers will be notified in the coming weeks.”
Douglas-Gabriel adds that there remain limitations and that Cardona’s department will need to go through a formal process to correct DeVos’s version of ‘borrower defense to repayment’: “The new policy only applies to claims that have been approved to date, not any that are still under review or those that have been rejected. A senior department official told reporters Thursday the agency is reviewing the best approach for those claims going forward. The Biden administration said it will also pursue an overhaul of the prior administration’s rewrite of the borrower defense rules, a process that will require new rulemaking.”
There have been complaints for years about DeVos’s overhaul of the Department of Education’s processing of complaints from indebted students who claim they were defrauded by false advertising. It has also been well known that after she took over the department, a huge backlog of complaints piled up as she balked at processing them. In a New York Times report last week, Stacy Cowley reports on recently uncovered evidence demonstrating that when Betsy DeVos was pressured to begin processing complaints, some of which dated back to the Obama administration, she set up a process that violated the rights of the indebted students:
“The documents were obtained under court order by lawyers in the class-action case, which involves more than 200,000 people who brought claims under a relief program known as borrower defense to repayment… (T)he lawsuit, filed in 2019 in federal court in San Francisco, sought to compel the department to review claims that had languished for as long as four years. In a settlement agreement struck last year, the department agreed to speed things up and make decisions.”
Cowley continues: “Nearly 95 percent of the borrowers in the case whose claims were decided were rejected, according to court filings.” “In Ms. DeVos’s final year in office, her agency denied nearly 130,000 claims—far surpassing the 9,000 rejections in the prior five years—with a system that pressured workers to speed through applications in a matter of minutes…. The department aimed to process 5,000 applications a week.. a standard that required agency employees to adjudicate claims that could stretch to hundreds of pages in less than 12 minutes. Those who did it faster were eligible for bonuses; those who took longer risked being fired. Agency employees rejected claims… for not including written evidence that borrowers were never required to submit.” “After the borrowers’ lawyers complained, Judge William Alsup rejected the settlement in October. His ruling strongly criticized the department for ‘issuing perfunctory denial notices utterly devoid of meaningful explanation at a blistering pace.'”
Betsy DeVos is no longer operating a college loan program for the benefit of for-profit colleges and trade schools at the expense of the rights of their students who have, for years in many cases, been awaiting consideration of their particular cases. It is a good thing that Miguel Cardona, the new Secretary of Education, has begun to correct longstanding injustice in the Department’s adjudication of student loan complaints.