A new lawsuit alleges that the U.S. Department of Education, led by Betsy DeVos, is still collecting student loan payments from borrowers who are supposed to receive student loan forgiveness.
Here’s what you need to know.
The lawsuit, which was filed Tuesday by California-based Housing and Economic Rights Advocates (HERA), alleges that the Education Department is ignoring a federal judge’s ruling last month to begin student loan debt relief for certain borrowers affected by the Borrower Defense Rule.
Those impacted include those with federal student loans who attended for-profit schools that closed before those borrowers could earn a degree.
This follows action from attorneys general from 19 states, plus the District of Columbia, who sued DeVos and the Education Department for delaying a borrower protection rule that was scheduled to take effect beginning July 1.
According to the National Student Legal Defense Network, which is representing HERA, approximately 1,400 campuses that closed between November 2013 and November 2015 are eligible to have their student loans forgiven.
The plaintiff is asking the court for at least the following relief:
- Complete student loan discharge: Borrowers no longer should be obligated to repay any outstanding principal, accrued interest or collection costs on their federal student loans (if they receive student loan discharge due to their campus closing).
- Refund of student loan payments: Borrowers should be reimbursed for all payments made to date on their federal student loans, including through wage garnishment or tax refund offsets.
- Federal aid eligibility: Borrowers should be made eligible for new federal student loans and grants, including Pell grants.
Clear credit history: Borrowers should have their credit history cleared of any adverse impact as a result of the affected student loans.
Borrower Defense To Repaying
Borrower Defense To Repaying allows students to have their federal student loans forgiven if a school employed illegal or deceptive practices to encourage the students to borrow debt to attend the school.
DeVos believes that the borrower defense to repaying rule is confusing and unfair to both students and schools. While critics viewed the Education Department’s previous delay attempts as a win for the for-profit college industry, DeVos has said that the rule changes will still help students who are victims of fraud.
“Fraud, especially fraud committed by a school, is simply unacceptable,” DeVos said in a statement in June. “Unfortunately, last year’s rulemaking effort missed an opportunity to get it right. The result is a muddled process that’s unfair to students and schools, and puts taxpayers on the hook for significant costs.”
DeVos said she wants to strike a fair balance between protecting students from predatory practices and creating balanced rules to which colleges can adhere. When the federal government forgives student loans – even if a college committed fraud – taxpayers effectively foot the bill.
DeVos has proposed creating a new formula for student loan forgiveness, which would cancel a portion of a borrower’s student loan debt based on the income of students who graduated from similar programs. The Education Department said it could save the federal government $12.7 billion over a 10-year period compared with the Obama rule.
According to data from the Education Department, as of June 2018, approximately $535 million across 48,000 claims have been granted to students for student loan debt relief. More than 100,000 borrowers – many of whom attended now-defunct, for-profit colleges – are still waiting for their claims to be processed.
Your Next Steps
If student loan forgiveness is not an option, there are other proactive steps you can take regarding your student loans: