Seeking Answers on Loan Relief Claims

Lawyers for student borrowers have filed myriad lawsuits against Betsy DeVos, the U.S. Secretary of Education.

They've successfully argued that the Education Department should be required to carry out a 2016 borrower defense rule. And they managed to block a plan to offer partial loan cancellation to former Corinthian College students who previously were approved for debt relief.

Now those lawyers are aiming to force the department's hand on a massive backlog of claims from borrowers who say they were misled by their colleges. This week they filed a lawsuit in a California federal court that seeks to have delays in deciding on those claims ruled unlawful.

The total number of pending claims now stretches well over 150,000 -- most of them from students who attended programs operated by for-profit college chains like Corinthian, ITT Tech and DeVry. And many were filed as far back as 2015.

Federal statute gives student borrowers who were misled by their college the chance to argue that their federal loans should be cleared in a process known as borrower defense. The Obama administration approved nearly 30,000 borrower defense claims. But reviews have slowed to a complete stop under DeVos -- a development plaintiffs argue has caused borrowers to default on loans and has limited their ability to make major financial decisions or even apply for jobs.

"They've been clear in saying that not only do they not have any timetable for resolving cases. They haven't looked at them," said Eileen Connor, a lawyer and director of litigation for the Project on Predatory Student Lending, which filed the lawsuit. "That's really unfair, because these students have valid claims."

Connor and the lawyers arguing the case also say the delays violate the Administrative Procedure Act's requirement that federal agencies make prompt decisions. Unlike other lawsuits brought against the department, the plaintiffs aren't seeking a court ruling that the department should cancel borrowers' debts. Instead, they're asking that the Trump administration start issuing decisions on the outstanding claims.

DeVos has attributed delays to ongoing litigation involving the department's partial loan relief formula, which a judge blocked last year.

In a statement to The Washington Post this week, Liz Hill, department press secretary, said, "the only thing stopping the department from finalizing thousands of these claims is the constant stream of litigation brought by ideological, so-called student advocate special interests."

Those arguments, Connor said, are a "total smokescreen" and don't explain the department's inaction.

Legal Battle Over Loan Forgiveness

One of the first steps DeVos took as education secretary was to delay the Obama administration's 2016 borrower defense rule, which the Education Department promulgated in the wake of Corinthian's closure and the thousands of new loan forgiveness claims that followed. The rule established a uniform federal standard for borrower defense claims for the first time. But DeVos said it didn't properly account for concerns of institutions.

State attorneys general and the Project on Predatory Lending sued, and a federal court ruled last year that the rule must take effect. The decision didn't lead to more decisions on borrower defense claims, however.

Federal data show that the department hasn't approved or denied any claims in more than a year. Connor said the fight over the 2016 rule never prevented the Trump administration from taking action on thousands of earlier borrower defense applications filed before July 2017, which alleged violations of state law.

"The department always had the obligation to review these applications and decide where there's a meritorious claim under state law," she said.

Those claims include the one submitted by Alicia Davis, a former Corinthian student in Orlando. Davis, 36, attended an Everest College criminal justice program for two years before transferring to Valencia Community College. Despite assurances from Everest, her credits didn't transfer to the new institution. And Davis alleged that Everest deceptively took out more than $20,000 in federally backed loans on her behalf.

She eventually enrolled at the University of Central Florida, where she received a bachelor's degree and a master's degree. But her debt from Everest continued to balloon. After filing a borrower defense claim in 2015, and again the next year, she defaulted on her loans.

"I can't buy a car. I can't buy a house. I don't qualify for any of that," she said. "It's ruined me financially."

The defaulted loans have also blocked Davis, a crime analyst with a local law enforcement agency, from applying for jobs with the federal government.

She said she's received several threats from the Education Department that her wages could be garnished and her tax refund offset. But Davis never received any update on the status of her claim from the department except for an acknowledgment that her application was received.

Other plaintiffs in the lawsuit say they've delayed marriage or plans to have children because of the uncertainty surrounding their student loans.

Individual borrowers have previously filed lawsuits against the department over delays in reviewing their claims. The department has settled a handful of those cases this year -- in one instance, by allowing a borrower to clear her student loans through bankruptcy.

Yet the lawsuit filed this week is the first time that advocates have sued the department on behalf of all borrowers with pending claims. The Project on Predatory Student Lending also has asked borrowers to submit affidavits online about how they've been affected by the wait for a decision. More than 270 had submitted statements to a website by Thursday.