Department of Education Seems to Think Student Loan Forgiveness is Optional

The Department of Education Borrower Defense to Repayment has officially gone from being a blessing to a joke and now to essentially lights out.

Education Secretary Betsy DeVos has made it clear that she feels forgiving federal student loans for students who are victims of school fraud is wasteful. She’s said, “all one had to do was raise his or her hands to be entitled to so-called free money.” – Source

It’s not free money since these are students who were the victims of school fraud. The Department of Education is supposed to get the money back from the for-profit schools that seem to be the primary focus of fraud claims.

Reports out now say the Department of Education has no employees devoted full-time to investigating borrower,s’ complaints.

There are more than 105,000 applications for student loan debt relief that are dying a slow dusty death at Education while the department fights to reduce relief for students.

Even with clear cases of discharge of federal student loans for closed schools, the Department of Education is apparently sucking wind.

Just yesterday the Department was sued by Housing and Economic Rights Advocates (HERA) who just wants Education to follow their own rules.

HERA says, “Tens of thousands of borrowers who attended approximately 1,400 campuses that closed from November 1, 2013 until three years prior to the filing of this Complaint are presently entitled to have their federal student loans discharged without submitting an application.”



The resistance to the DeVos Department of Education processing fraud discharge applications, closed school forgiveness, or disabled military veterans forgiveness, seem endemic.

The HERA lawsuit claims that since the Trump Administration has taken over the Department of Education, the automatic provision in the law for federal student loan forgiveness for closed schools is just ignored.

The complaint says, “As part of the 2016 Rule, the Automatic Provision provides that, with respect to schools that closed on or after November 1, 2013, the Department will automatically discharge the loans of all eligible borrowers who do not subsequently re-enroll in another Title IV-eligible institution within three years. 81 Fed. Reg. at 76,078-82. Implementation of this provisions is “not discretionary.”

It also says, “Many of these student loan borrowers attended for-profit colleges that closed abruptly following state or federal government investigations that revealed that the closed schools had deceived students into obtaining federal student loan funds, while simultaneously failing to deliver those students an education of value.”

But the complaint states, “Following the change in administration after the 2016 election, however, the Department has unabashedly and intentionally refused to implement the Automatic Provision. Upon information and belief, the Department continues to collect on federal student loans that it is required by law to discharge.”

On January 10, 2017 the then Under Secretary of Education, Ted Mitchell, sent out a document titled “Recommendation for ITT borrowers alleging that they were guaranteed employment.”

In that Education Department assessment, it was found, nearly 32% of borrower defense applications alleged ITT had guaranteed employment if the students attended.

The document gives evidence former ITT employees corroborated misleading employment claims were used to attract students. The document says, “ITT borrower defense claims based on guaranteed employment misrepresentations are substantiated by the affidavits, interviews, and testimony of former employees at campuses nationwide. This former employee evidence establishes that, in response to oral directives from management, recruiters from at least 2005 through ITT’s closing led prospective students to believe that employment was guaranteed.

ITT orally directed staff to present recruitment documents in a manner that guaranteed or otherwise assured employment. ITT employees were trained to provide these oral promises of employment despite the existence of written documents to the contrary.”

Yet the DeVos Education Department is sitting on forgiving these federal student loans, leaving defrauded students with damaged financial lives and at least in California, a clear case for immediate discharge under California law.

The same dockument referenced above goes on to say, “California’s UCL prohibits unfair competition, providing civil remedies for “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by [the false advertising law].”” Here, ITT’s statements leading prospective students to believe that they were guaranteed employment constitute “unlawful” and “fraudulent” business practices under the UCL.”

By the very definition of the Borrower Defense to Repayment program the California students federal loans should have been forgiven a long time ago, they were not. And since ITT closed, the loans should have been forgiven under the closed school discharge forgiveness program. They were not.

Steve Rhode
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This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.