Education Secretary DeVos sued over for-profit college fraud rule
The Department of Education (ED) changed its rules on how students defrauded by for-profit colleges seek debt relief, leading to legal proceedings and a political fight to return the rule to its Obama-era form and a veto from President Trump in support of change.
Now, consumer advocates are taking legal action over a related and lesser-known change to the Trump administration’s student debt rules in another attempt to get more relief for defrauded students.
The plaintiffs argue that DeVos’ new standards “wrongly deny student loan borrowers who have successfully argued a claim through the borrower defense process most of the relief they are entitled to on their federal student loans.”
The Education Department did not immediately return a request for comment.
“Arbitrary, capricious and against the law”
The retrial is the latest among the Trump administration’s policies regarding students defrauded by U.S. colleges.
The so-called Borrower Defense Rules were originally enshrined in law through the Higher Education Act in the early 1990s and were intended to help victims of fraudulent schools seek redress. Under current law, borrowers receiving federal loans are eligible for loan forgiveness if a college or university has misled them or engaged in other wrongdoing in violation of certain state laws.
In 2015, after several for-profit colleges died out amid scandals, the Obama administration put regulations in place such that defrauded students who applied successfully were granted full debt relief.
Education Secretary Betsy DeVos changed that rule in 2019 and made it harder to access relief, alleging that the Obama administration left behind a messy set of policies.
“When the borrower’s defense arrived in 1995, it (…) previous hearing before the House Committee on Education and Work. “Then the previous administration armed the regulations against schools they just didn’t like. They applied the law in a discriminatory manner. Thus, since 2015, there has been a 5,000% increase in defense requests from borrowers. “
A political quarrel ensued: Congress rejected the new DeVos rules, tried to reinstall the Obama-era rules, which were then passed by the GOP-controlled Senate, before being rejected by President Donald Trump. (The House has signaled that it will attempt to override the veto.)
The new lawsuit filed Tuesday argues that the DeVos-era “partial relief rule” resulted in “the vast majority of student borrowers receiving only partial relief or no relief … despite the fact that they have established a request for the defense of the borrower ”.
Previously, when a plaintiff made a claim and succeeded, all of their debt was dissolved.
Under the new partial relief rule, ED compares the median earnings of recent graduates from the program the borrower attended with the median earnings of recent graduates from similar programs, and then decides the amount of debt relief.
ED’s rule “ignores evidence submitted by borrowers on how their schools’ actions have hurt them,” the lawsuit argues. “The partial relief rule takes the wrong formula, providing borrowers with full debt relief only when their program’s median income data is two standard deviations lower than that of the comparison programs. The formula assumes that the data will follow a normal distribution pattern, but the income data will not. “
Active duty member defrauded by for-profit channel
Brittany Saulsberry, who grew up in a poor Dallas neighborhood, discovered Everest College, part of the now-defunct for-profit Corinthian Colleges, when she met college recruiters at her high school.
The representative presented the school as a “way out” of their predicament and promised that attending a university like Everest would allow them to find a job. Saulsberry kept the idea of college in his back pocket and, after graduating, joined the United States Navy in 2006.
Upon her return to Texas in 2008, she worked as a reservist and as a security guard. She saw advertisements promising accredited degrees and good jobs by Everest. She enrolled but was called up to active duty in 2011 and deployed to Afghanistan as a student.
When she returned and finished her studies, Everest Career Services offered no help finding a job. Saulsberry ended up finding a job as a postwoman and teaching assistant, which had nothing to do with what she had studied.
And he had “tens of thousands of dollars” left in federal student loans. In 2016, she submitted a request for the cancellation of the remaining debt, especially since Everest had misrepresented the placement, accreditation and cost of the program.
This request was made possible by the Obama-era “borrower defense” rule. In December 2019, ED approved Saulsberry’s request but only granted him 25% relief on all of his federal student loans, citing the partial relief rule.
Saulsberry, who has since returned to active duty in the Navy, is one of the plaintiffs in the class action lawsuit, along with six other people who also attended for-profit schools.
The lawsuit says the excess debt not only worsened Saulsberry’s credit, but “made it considerably more difficult for her to plan for her financial future.”
Aarthi is a reporter for Yahoo Finance covering consumer finance and education. Follow her on Twitter @aarthiswami. If you attended a for-profit college and would like to share your experience, contact her at [email protected]