Student Loan Relief Denied in Certain Fraud Cases
When Albert Paul Cruz opened a letter from the Ministry of Education last month he saw the words he was waiting for: “We have approved your request. The government finally admitted he had been a victim of fraud ITT Technical Institute, the now defunct for-profit chain where he had racked up nearly $ 60,000 in student loans to get what he considers a worthless degree.
Then he went to the next page and saw how much of that debt would be canceled: zero. The department, according to the letter, had concluded that he had not suffered any financial loss.
“Do you admit that the school defrauded its students and claim it didn’t hurt us?” Said Cruz, who obtained an associate’s degree in computer network systems in 2010 but has never worked in this field. “How is it possible?”
The approval of claims without financial relief is the latest twist in long-standing efforts by defrauded borrowers to secure federal government assistance through a program to help former students whose schools offered fictitious degrees and credits. empty promises.
Years of delays and attempts to reduce the relief borrowers may receive have resulted in dozens of lawsuits against the department. Now, under pressure from federal courts to deal with hundreds of thousands of unresolved claims, the Education Department is dealing with them – and saying no. More than 45,000 refusal notices have been sent in recent months, according to agency data.
And when the ministry is legally required to approve a claim, it is often granting only a tiny relief – or not at all.
“Borrowers can’t win,” said Eileen Connor, legal director of Project on Predatory Student Lending, a group that has represented borrowers in several cases against the department, including one filed last month which calls into question the agency’s partial relief approach. “To even tell borrowers who can prove they were cheated by their school that they still don’t get any relief is absurd and cruel.
Education Secretary Betsy DeVos has long refused to participate in the program, which she once called a “free money” gift. Last year, she said the program was a “mess” when it took over, and added that a new methodology for calculating relief – including granting none on many claims. Approved – “Treats students fairly and ensures that taxpayers who have not gone to college or who have faithfully repaid their student loans do not bear the costs of student loans for those who have not suffered prejudice.
Education Ministry spokesperson Angela Morabito said on Friday the agency “faithfully enforced” existing rules for the program and that the law “does not require any relief under certain circumstances.”
The ministry’s formula for relief uses a complicated sliding scale on which the debt reduction of defrauded students is calculated using group income data. For former ITT students, agency calculations call for no relief for students in the majority of school programs.
Ms Morabito said Ms DeVos had “developed a scientifically sound method to assess and process complaints”.
Ms. DeVos has long opposed the relief program, called Defense of the borrower on repayment, which allows students to eliminate their federal student loan debts if their schools have acted fraudulently. The decades-old provision was little used until five years ago, when a coordinated state and federal crackdown toppled major chains including ITT and Corinthian Colleges. Millions of former students were left with large debts for unnecessary degrees from failed schools or credits that other institutions would not accept.
The then education secretary, Arne Duncan, promised to forgive student debts in Corinthian, and said more relief would follow. “This is our first major action on this subject, but it will obviously not be the last,” he said in 2015. Around 30,000 candidates have benefited from relief in the last days of the Obama administration.
But Ms. DeVos went to great lengths to block further requests.
His department treated no complaints for more than a year. A judge concluded that he had rules illegally delayed which were written under the last administration to simplify and speed up claims. Another judge concluded that the department had violates a federal privacy law by obtaining information on the income of borrowers because he was trying to justify forgiveness of less of their debt.
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When she was forced to pay off some loans, Ms. DeVos added a handwritten note on the form granting the request, stating that she had approved it “with extreme dissatisfaction”. And in October, a federal judge despised her for improperly billing 45,000 former Corinthian students after being ordered to stop collecting their debts.
It was one of many high-profile losses for the department: a decision last month ordered Ms DeVos to completely erase the loans of 7,200 former Corinthian students. But judges have generally ordered him to deal with claims that have dragged on for as long as four years – without necessarily approving them or granting them redress.
Mr. Cruz, who works as a prototype technician for an automobile manufacturer, was one of ITT’s more than 10,000 alumni, which collapsed in 2016, who sought to use the borrower’s defense provision. Education department officials concluded in a note of 2017 that ITT had engaged in “blatant” and “pervasive” fraud, and they recommended that eligible borrowers be given “total relief”.
The ministry had decided before Ms. DeVos arrived to approve the claims of some of these borrowers, including Mr. Cruz, as well as students who had attended some campuses run by ITT and the American Career Institute, a trade school that admitted to falsifying records and cheating on students.
But she rescinded the recommendation for full relief and interpreted the department’s earlier rulings literally: The ITT ruling applied specifically to those who attended the school’s campuses in California, but was intended as a model for requests from other states. Ms. DeVos did not extend it to ITT students elsewhere.
These students are therefore rejected, as well as those of several other chains, including the University of Phoenix, which Federal Trade Commission recently punished for making fraudulent claims.
More than a dozen recent denial notices reviewed by the New York Times range from incomplete to opaque. A row in one read, “We reviewed the evidence gathered from the following sources: [INSERT BULLETTED LIST AND FORMAT BEFORE SENDING]. ” Another opinion told the borrower that the application “fails for the following reason (s): other”.
But the answer received by David Boyer, a former ITT student, is more typical. It included a long list of evidence the agency said it reviewed, including submissions from the Consumer Financial Protection Bureau, the ITT accreditor, the Veterans Education Success advocacy group, and the Iowa Attorneys General, from Massachusetts and New Mexico.
The ministry rejected Mr. Boyer’s allegations, citing “insufficient evidence”. (Respondents can request a reconsideration, but several lawyers said they have never seen such a request succeed.)
Ms DeVos’ time at the Education Department is likely coming to an end: She told agency employees she had no plans to stay if President Trump was re-elected, according to two employees who have spoken on condition of anonymity.
But his downsizing of the borrower defense system will outlast his tenure. This month, new agency rules severely limiting new complaints took effect even after a rare bipartisan effort in Congress to prevent it. Mr. Trump vetoed the bill – its first veto on domestic policy – and legislators couldn’t ignore it.
The obstruction of the agency infuriated members of Congress, including Representative Robert C. Scott, a Democrat from Virginia who is chairman of the House Education Committee. The committee recently published a 30 page report who concluded that the ministry’s methodology for granting relief was so restrictive that it was mathematically impossible for many borrowers to have their loans wiped out entirely.
The borrower advocacy system “is a valuable tool in giving victims of fraud a second chance to access quality education,” said Scott. “Instead of using its authority to ensure that defrauded borrowers are unharmed, the ministry has delayed and denied aid to hundreds of thousands of people.”
A second chance, that’s what Mr. Boyer wants. A Navy veteran, he used the GI Bill to attend ITT – one of the for-profit schools that veterans specifically wanted because of their lucrative educational benefits.
Mr. Boyer earned a bachelor’s degree in applied science and electrical engineering which was worthless. ITT’s reputation was so bad that several potential employers rejected it once they figured out where his degree came from, he said. He ended up removing his name from his CV.
“We’ve all struggled to hit minimum wage,” Boyer said. After graduation, he took a job repairing soda machines and microwaves at convenience stores.
A successful borrower’s defense claim would have repaid federal loans taken out by Mr. Boyer to pay for tuition that his GI Bill benefits did not cover. Mr Boyer, who is 52 and lives in Potosi, Missouri, and now works as a trade school teacher, said if his loans were repaid he would pursue higher education again.
“I would like to have a degree that means something,” he said.