Inspector General: Resume Processing Borrower-Defense Claims

The Department of Education's inspector general said Monday that review of student loan relief applications known as borrower-defense claims should resume after months without a single ruling from the Trump administration.

The Office of Inspector General also recommended that the department establish a time frame for reviewing claims and either issuing a denial or discharging the loan.

Democrats seized on the report as evidence that the Department of Education under Secretary Betsy DeVos has harmed tens of thousands of student borrowers by halting review of the claims by students who allege they were defrauded or misled by their institutions.

"Now Secretary DeVos has absolutely no excuse -- it’s time to cancel these fraudulent loans," said Senator Elizabeth Warren, a Massachusetts Democrat, in a statement.

About 95,000 borrower-defense claims are pending review by the department, administration officials have said -- roughly 65 percent of those filed by former students of for-profit Corinthian Colleges institutions.

While Democrats and student advocates have repeatedly sought answers on the lack of progress, the department has said it is working to set up a process for adjudicating claims.

Department spokeswoman Liz Hill said the OIG report confirmed "the previous administration did not establish an adequate adjudication process for borrower-defense claims."

"The desire to avoid denying claims or adjudicating complicated claims left thousands of students in limbo," she said. "That’s why the department, under the leadership of Secretary DeVos, has been working diligently to put a process in place that provides a consistent and reliable way to adjudicate pending borrower-defense claims, provide fair relief to defrauded students, and also protect taxpayers."

The inspector general's report, though, found that Federal Student Aid's Borrower Defense Unit had clear criteria for review of claims, even though it recommended clearer documentation of legal memoranda used to justify discharges and establishing clear policies on review of unique claims, among other changes.