Students Sue Education Department to Force Movement on Debt Relief

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Democratic Presidential Candidates Propose Solutions

 

Student debt has become one hot topic among many in the runup to next year’s presidential election, but a federal suit filed in June may bring relief to borrowers regardless of what happens in 2020.

More than 150,000 former students of for-profit colleges have filed a federal lawsuit seeking to force the U.S. Department of Education to either grant or deny their applications for borrower defense loan cancellation.

The complaint, which also names Education Secretary Betsy DeVos, was filed on June 25 in the California Northern District and alleges the department is withholding the student debt relief to which they’re legally entitled.

“The Department’s abdication of its responsibility is not a neutral choice,” wrote Eileen M. Connor, an attorney with the Legal Services Center of Harvard Law School, in the lawsuit. “Its decision to keep over 160,000 students in limbo—some for over four years—has damaged students’ credit and limited their access to federal student aid. It has caused significant emotional distress, associated physical harm, and a loss of wealth and opportunity that students will never recover.”

Student loan debt is the highest it’s ever been, having reached $1.49 trillion in the first quarter of 2019, according to a study by the Federal Reserve Bank of New York. Some 45 million borrowers owe student loan debt in the U.S.

“The for-profit college industry has gotten larger over time and more concentrated in the hands of certain large, politically powerful companies,” said Adam Pulver, an attorney with Public Citizen Litigation Group, a watchdog organization. “They spend a lot of money on lobbying and lawyers to prevent students from vindicating their rights, and to fight against policies that regulate the industry and restrict predatory practices.”

Over time, these expenditures have allowed the for-profit college industry to engage in more predatory practices and overpower the Obama-era system changes to 1994 Borrower Defense Regulations, which were designed to allow students to have their federal student loans canceled if their school engaged in misconduct or misled them about job assistance placement, for example.

Ms. Devos employed Section 705 of the Administrative Procedure Act to freeze indefinitely the program’s start but on September 17, 2018, Federal Judge Randolph Moss deemed Ms. Devos’ freeze unlawful, which opened the door to the current lawsuit.

“If schools aren’t able to provide educations that allow graduates or alumni to succeed then it discourages people from attending college in the first place,” Pulver told PacerMonitor.

A related class action is Calvillo Manriquez v. DeVos, also filed in California Northern District Court.

Plaintiffs Martin Calvillo Manriquez, Jamal Cornelius, and Rthwan Dobashi borrowed federal student loans in order to attend career training programs at Corinthian Colleges schools but were allegedly mislead and mistreated.

“It [U.S. Education Department] has halted the processing of the applications of named Plaintiffs and other students who are eligible for loan relief,” stated Housing & Economic Rights Advocates Attorney Noah Zinner in the complaint. “In so doing, it has abandoned an established rule and leftover 80,000 former Corinthian students who have applied for loan discharge in limbo.”

According to court records, since January 20, 2017 — when Donald Trump was inaugurated — the department has not granted a single discharge.

“Unfortunately, the US Department of Education is being led on these policy issues by individuals who have long been associated with for-profit colleges that see higher education as a business, which means that the policy environment is very much not oriented towards ensuring students get a valuable education and are treated fairly,” said Pulver.

Nearly all of the Democratic presidential candidates aim to change predatory practices and make attending college more affordable, according to the National Association of Student Financial Aid Administrators website.

“If a Democrat gets elected next year, we will have a new education secretary and the education department will have a different priority than the current administration,” said Case Western Reserve University administrative law professor Jonathan Entin. “But if a Democrat is elected president while Republicans keep the Senate and take back the House, the for-profit sector is likely closer to Republicans and Congress will push back against whatever the Democratic president and secretary might try to do.”

A sampling of candidates revealed the following:

  • Kamala Harris, former California Attorney General, has discussed offering household income-based free tuition at public colleges and universities.
  • Former Vice President Joe Biden proposes to make community college free.
  • Sen. Bernie Sanders of Vermont proposed cancelling all $1.6 trillion in outstanding student loan debt, including private and graduate school debt, paid for through a tax on Wall Street that would reportedly generate $2 trillion in 10 years.
  • Former Texas Rep. Beto O’Rourke is in support of an expansion of the Public Service Loan Forgiveness program.
  • Sen. Cory Booker of New Jersey supports free public two- or four-year college implemented through federal/state partnership and introduced a bill that would provide a $1,000 account for every baby born to save for college or pay for a home.
  • Sen. Elizabeth Warren of Massachusetts supports a prorated loan forgiveness program based on household income.
  • Mayor Pete Buttigieg of South Bend, Indiana, supports expanding loan forgiveness for teachers and public servants and proposes to increase the number of service jobs available to students from 75,000 to 250,000 and up to 1 million positions by 2026. The initiative offers consideration for public service student debt forgiveness, vocational training, and hiring preference for service fellows.
  • Senator Kirsten Gillibrand of New York is in favor of student loan borrowers having the option of refinancing loans at 4% and expanding eligibility for Public Service Loan Forgiveness so every type of federal loan and repayment plan is included in the program. Borrowers would be able to receive partial forgiveness after five years of public service
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