Merkley Pushes Secretary DeVos on Refusal to Help Students Cheated By Predatory Colleges

Merkley Pushes Secretary DeVos on Refusal to Help Students Cheated By Predatory Colleges

The Department of Education has failed to fulfill legal obligation to review loan relief claims

Washington, D.C. –  Oregon’s Senator Jeff Merkley today pressed the U.S. Department of Education over prolonged inaction regarding federal student loan discharge requests, and urged Secretary Betsy DeVos to stand up for victims of predatory college scams, many of which were perpetrated by for-profit colleges.

Under the Borrower Defense to Repayment provision in the Higher Education Act (HEA), the Department has the authority to cancel loans for students who were misled by a college or university, or loans made in violation of state laws.

“I am deeply disturbed by the Department’s refusal to help these borrowers and your disregard for the distress these delays continue to have on borrower’s daily lives and their families,” Merkley wrote in a letter to U.S. Department of Education Secretary Betsy DeVos. “Because of your failure to act, thousands of students remain waiting for relief with nothing but a millstone of debt and a worthless degree.”

For-profit colleges and universities played a critical role in the creation of the national student loan debt crisis and student loan defaults, by luring students—often targeting students of color and students from low-income households—into programs under false claims of the value of their programs and post-graduation earnings. Anemic graduation rates and poor quality programs, which in some cases fail to meet basic accreditation requirements necessary for students to receive licenses in their fields, left students with catastrophic loans and no means to pay them off. In Oregon, more than a dozen predatory for-profit colleges have closed since 2014. The closures of Heald College, ITT Technical Institute, Anthem College, DeVry University, Le Cordon Bleu College of Culinary Arts, University of Phoenix, and Sanford-Brown—among others—have left over four thousand Oregon students displaced and defrauded.

In 2016, President Obama approved new protections to provide debt relief to students cheated by predatory for-profit institutions by allowing the Department of Education to cancel federal student loans for students who were impacted by a school that closed or engaged in fraud. The following year, Oregon’s Attorney General Ellen Rosenblum submitted a group application with other attorneys general on behalf of defrauded students in Oregon and across the country. To date, 3,281 students in Oregon have applied for borrower defense charges. Although more than two years have passed since the group application was filed, two-thirds of the borrowers’ cases from Oregon have yet to be reviewed.

Under Secretary DeVos, who has deep financial connections to the for-profit college industry, the Department has failed to fulfill its moral and legal obligation to stand by students who have been victimized by predatory colleges. In fact, the Department did not approve or deny a single claim between June 2018 and June 2019—?and focused instead on attempts to overhaul the 2016 borrower defense process to make it harder for students to get out from under their debts. 

Since assuming office, Secretary DeVos has used her position to jeopardize the well-being of students in order to funnel massive profits into the for-profit education industry. Ethics paperwork completed during her confirmation process revealed that Secretary DeVos held investments in for-profit education corporations and a student loan debt collection firm. A full report compiled by government ethics officials detailing Secretary DeVos’ 102 conflicts of interest can be found here.

Secretary DeVos appointed former for-profit college executives from Bridgepoint Education and Career Education Corporation to senior roles in the department.  Bridgepoint Education collected federal funds to line the pockets of executives while lying about abysmal graduation rates and tricking students into taking deceptively costly loans. Career Education Corporation is another for-profit school operator that was forced to enter into legal settlements with 48 states and the District of Columbia after the company’s campuses routinely misled students about enrollment costs and the value of their programs.

The full text of Merkley’s letter can be found below and is available here.

 

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Dear Secretary DeVos,

I write with significant concerns over the U.S. Department of Education’s (“Department”) continued backlog of federal student loan discharge requests under “borrower defense.” Under the Borrower Defense to Repayment provision in the Higher Education Act (HEA), the Department has the legal authority to cancel the loans of students who were cheated, misled, or defrauded by predatory colleges.

Data recently provided to my office by the Department shows that Oregon Attorney General Ellen Rosenblum submitted a group application on June 5, 2017 on behalf of Oregon borrowers defrauded by Corinthian Colleges, Inc. with supporting evidence establishing students’ eligibility for federal loan discharge under the borrower defense provision of the HEA. [1]

Attorneys general from several states have assembled group discharge applications to make it easier for the Department to discharge these loans. Despite these efforts and federal court orders asking you to stop debt collection on loans by defrauded students[2] and to immediately provide relief to students,[3] two-thirds of the 3,281 applications from Oregon borrowers remain pending, including the group discharge application submitted over two years ago.[4] The total number of pending borrower defense claims continues to balloon in size because of your inexcusable failure to review and respond to these applications. I am appalled that it has been one entire year since the Department has publically reported any action on borrower defense claims.[5]

In Oregon, over a dozen predatory for-profit institutions have closed since 2014.[6] The closures displaced over four thousand students—the majority of whom were Pell Grant recipients, minority students, and working adults—who had the greatest financial need among their peers and were chasing a dream to build a better life for themselves and their families.

I am deeply disturbed by the Department’s refusal to help these borrowers and your disregard for the distress your illegal delays[7] continue to have on borrower’s daily lives and their families. Because of your failure to act, thousands of students remain waiting for relief with nothing but a millstone of debt and a worthless degree.

As an appointed official, you have a moral and legal obligation to make decisions based on what is best for students and our country. It is time for the Department to do the right thing by ending these delays and providing federal student loan discharges for borrowers who are entitled to loan discharges under the law.

I ask you to immediately communicate the status of the remaining claims to affected students and immediately enforce the borrower defense rule without any further delays.

Sincerely,



[1] U.S. Department of Education. Agency Response to Questions for the Record submitted by Senator Merkley to the Senate Committee on Appropriations Subcommittee on Labor, Health and Human Services, Education and Related Agencies. Hearing on the Fiscal Year 2020 Budget Request for the U.S. Department of Education. May 28, 2019.

[2] Kreighbaum, A. (2018, June 21). Court Tells Department of Ed to Stop Debt Collections for Defrauded Borrowers. Retrieved from https://www.insidehighered.com/quicktakes/2018/06/21/court-tells-department-ed-stop-debt-collections-defrauded-borrowers.

[3] Kreighbaum, A. (2018, October 17). More than a year later, Obama student loan rule takes effect. Retrieved from https://www.insidehighered.com/news/2018/10/17/more-year-later-obama-student-loan-rule-takes-effect

[4] U.S. Department of Education. (2018). Borrower Defense to Repayment Report. Retrieved from: https://studentaid.ed.gov/sa/about/data-center/student/loan-forgiveness/borrower-defense-data

[5] Ibid.

[6] Bauman, D., & O'Leary, B. (2019, April 4). The Chronicle of Higher Education: College Closures, 2014-18. Retrieved from https://www.chronicle.com/interactives/college-closures#id=OG_3_all.

[7] Stratford, M. (2018, September 12). Judge rules DeVos delay of Obama-era student loan rules 'unlawful'. Retrieved from https://www.politico.com/story/2018/09/12/devos-obama-student-loan-rules-818296