Senators Blast Education Department Inaction on Loan Forgiveness

Senators Elizabeth Warren and Dick Durbin today issued a report giving Betsy DeVos and the Department of Education a failing grade on their handling of claims for loan forgiveness from students defrauded by for-profit colleges and trade schools. Fourteen other Democratic Senators joined Warren and Durbin in a letter calling on the Department to take action to respond to the report's devastating findings: Despite legal requirements that defrauded students receive discharges of their federal student loans, Secretary DeVos's Education Department has not forgiven a single student loan since Trump took office and is sitting on a backlog of 87,000 claims for relief from students. The Department has even failed to discharge loans of almost 2,000 students who were notified by the Obama Education Department that their applications for loan forgiveness had been approved.

Proprietary schools rely on federal student aid programs, especially loan programs, as their lifeblood, and often employ boiler-room tactics to sign students up for programs of dubious or no value to get access to those federal funds. When schools go under from the weight of their own fraud and mismanagement, or when students discover that the degrees they've obtained or the classes they've attended are of little or no value on the job market, it is students who are left holding the bag of unsustainable student loan debt owed to the federal government.

To address this problem, the Higher Education Act has provided for many years that students have a defense to repayment if a school defrauded them or wronged them legally in other ways, and Department regulations provide a process for students to obtain cancellation of their loans, and reimbursement of previous loan repayments, when they are victims of predatory schools. With the wave of disclosures in recent years of fraud and abuse by proprietary schools such as Corinthian Colleges and ITT Technical Institute, requests for loan forgiveness have mounted, and the Obama Administration approved over 30,000 of those requests. Obama's Education Department also promulgated new rules to improve the process and increase protections for students against predatory schools.

Under the Trump administration, it's been a different story. Even as the Administration tries to delay and walk back the improvements to the rules protecting students, it has also essentially halted the processing of requests for loan forgiveness, even though the number of victimized students seeking relief continues to mount. The Department has taken no action on more than 50,000 claims that were pending when Obama left office and over 35,000 that have come in since then. 

The Department's actions reflect not only the Trump administration's general approach of diminishing regulatory protections for the public, but also Secretatry DeVos's specific preference for the interests of the proprietary school industry over those of the students it entices into debt. In her view, many of those students are just freeloaders who want only to "raise [their] hands to be entitled to so-called free money"—her characterization of how existing rules supposedly favor students seeking handouts.

Even under the Obama administration, it took a lot more than just raising a hand for a student to establish a right to cancellation of a debt. And under DeVos's tenure, students who've raised their hands have gotten nothing but the back of the Secretary's.

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