Over 158,000 Students of Abusive Colleges Applied for Loan Cancellation, Yet the U.S. Department of Education has been Refusing to Process Any of their Claims for Over a Year, with some Students Waiting over Four Years for Action

The Project on Predatory Student Lending is Calling for Students Still Waiting for Debt Relief to Submit Written Testimony in the Lawsuit

BOSTON, M.A. – Today, 158,110 defrauded former for-profit college students filed a lawsuit against the U.S. Department of Education and Education Secretary Betsy DeVos seeking to force the agency to follow existing law and issue the debt relief to which the former students are entitled.

Under existing law, students and former students are eligible for federal loan cancellation if the college misled the students or violated state laws relating to the students’ education—as is the case for all the colleges these former students received loans to attend.

The former students are pressing Secretary DeVos and the Department to follow the law and immediately process their claims for debt relief. The Department has not processed a single claim in over a year and many of these students and former students have been waiting over four years for resolution. The Department’s inaction comes after it issued these predatory loans in the first place, using taxpayer dollars, and despite known fraudulent conduct by for-profit colleges.

The case, Sweet v DeVos, was filed today in the United States District Court for the Northern District of California in the San Francisco Bay Area. The plaintiffs, represented by the Project on Predatory Student Lending at Harvard’s Legal Services Center along with Housing & Economic Rights Advocates (HERA), are suing on behalf of a class of more than 158,000 former students who have filed applications for borrower defense to repayment. As the complaint states, the Department of Education is intentionally ignoring students’ borrower defense claims, has taken no action to resolve them, and in many instances, forcibly collects loans in spite of the students’ claims that the loans are not valid.

“We’re suing Betsy DeVos and the Department of Education to hold them accountable and protect students across the country,” said Project on Predatory Student Lending Director Toby Merrill. “The law is clear: students who experienced fraud should not be required to pay back federal loans that should never have been made by the Department in the first place. Since Betsy DeVos continues to ignore these students’ legal rights, the only way they can have their voices heard is through the courts.”

Jessica Jacobson, one of the named plaintiffs, submitted her borrower defense claim in 2015 after being scammed by the for-profit college, New England Institute of Art. She is still waiting for her $30,000 in federal loans to be cancelled.

“This has put my whole life on hold. I can’t sign for home, a car, anything because I don’t know what’s going to happen to this debt. It’s extremely stressful and impacts my whole family,” Jacobson said. “It’s beyond disappointing. The Department of Education did nothing to stop these schools from doing this in the first place and now they are ignoring those of us who were cheated on their watch.”

“The Department of Education has knowingly enabled for-profit colleges to defraud students,” said Eileen Connor, Legal Director at the Project on Predatory Student Lending. “It recklessly continued to act as a loan broker for disreputable schools despite clear records of abuse and misconduct, and now the Department refuses to acknowledge the damage it has done by issuing these predatory loans to students, at taxpayers’ expense. With this lawsuit, we will hold Betsy DeVos accountable and deliver justice for those students awaiting debt relief.”

“The Department has a duty to act on behalf of the countless Americans, including dozens of HERA clients, who have been defrauded by predatory for-profit schools,” said Natalie Lyons, Senior Attorney for Housing & Economic Rights Advocates. “Rather, the Department is abdicating its duty while thousands of individuals struggle under the weight of burdensome student loan debt and without the benefit of a credible education to advance their lives and the lives of their families. We’re taking this action, because of the Department and Secretary DeVos’ failure to do so.”

In addition to filing suit, the Project on Predatory Student Lending is calling on students—specifically those who were cheated by for-profit colleges and are awaiting the Department’s decision on their borrower defense claims—to support the litigation and share with the court the countless ways they have been hurt by the for-profit college industry and the Department. Students can supply written testimony in this lawsuit by filling out a simple online form here.

Click here to view quotations from students across the country who were defrauded by for-profit colleges, as well as statements of support for today’s litigation from organizations and elected officials.

Currently, 45 million Americans have nearly $1.6 trillion combined in student loan debt, depressing the economic progression of families and the broader economy. Today’s lawsuit addresses the most pernicious type of student loan debt—the kind made to students at abusive for-profit colleges. The Department of Education issued these loans despite glaring indicators that the schools would do nothing but rip off students. Ultimately, the students are paying the price for a worthless degree that has failed to improve their lives, and in many cases, has caused severe personal and economic setbacks. For-profit colleges account for 13 percent of the student population, but 47 percent of federal loan defaults. And 98 percent of all loan cancellation applications sent to the federal government in 2016 and 2017 were due to fraudulent for-profit colleges.

Background on the Case:

Over the past several decades, hundreds of thousands of students borrowed federal student loans to attend various for-profit colleges, including ITT Technical Institute, Corinthian Colleges, the Art Institutes, the New England Institute of Art, Salter College, Brooks Institute of Photography, and more. The schools falsely and deceptively promised students high-paying jobs, state-of-the-art vocational training, and long and fulfilling careers.

Since 2015, over 200,000 of these former students have asserted their right according to existing federal law to a complete discharge of their federal student loans due to their schools’ misconduct. As it was legally obligated to do, the Department of Education started to adjudicate these borrower defenses, approving nearly 28,000 borrower defenses in the six-month period before January 20, 2017.

Since then, under Secretary DeVos’ tenure, the Department of Education halted all processing of borrower defense claims. It has refused to adjudicate any borrower defense from any student since May 2018, and has ordered the office of Federal Student Aid (“FSA”) to stop processing any borrower defense application.

The Department of Education’s affirmative decision to keep these students in limbo—some for over four years—has further destroyed students’ credit and limited their access to federal student aid. For students who have defaulted on their loans, the Department of Education has invoked extraordinary extrajudicial powers to garnish their wages or seize their tax credits (for many, their Earned Income Tax Credit).

Named Plaintiffs bring this lawsuit under the Administrative Procedure Act on behalf of themselves and all other former students whose claims for loan cancellation have stalled.

Today’s lawsuit builds on past legal efforts to hold this administration accountable and protect students through court action. In the case of Williams v DeVos , students fought back against having their tax refunds stolen by the Department of Education, and won. In the case of Calvillo Manriquez v DeVos , students stopped the Department from using its illegal partial denial rule. And in Bauer v DeVos, a judge told the Department of Education that it must implement the 2016 Borrower Defense rule.

About the Project on Predatory Student Lending

Established in 2012, the Project on Predatory Student Lending represents former students of predatory for-profit colleges. Its mission is to litigate to make it legally and financially impossible for federally-funded predatory schools to cheat students and taxpayers.

The Project has brought a wide variety of cases on behalf of former students of for-profit colleges. It has sued the federal Department of Education for its failures to meet its legal obligation to police this industry and stop the perpetration and collection of fraudulent student loan debt.

About HERA

Housing and Economic Rights Advocates (HERA) is a California statewide, not-for-profit legal service and advocacy organization dedicated to helping Californians — particularly those most vulnerable — build a safe, sound financial future, free of discrimination and economic abuses, in all aspects of household financial concerns. It provides free legal services, consumer workshops, training for professionals and community organizing support, creates innovative solutions and engages in policy work locally, statewide and nationally.

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