A federal judge issued a scathing rebuke to Education Secretary Betsy DeVos for issuing mass denials of student loan forgiveness applications.
“The Secretary’s new perfunctory denial notices… contradict her original justification for delay, raise substantial questions under [federal law], and may impose irreparable harm upon the class of student-loan borrowers,” Judge William Alsup, of the U.S. District Court in the Northern District of California, wrote in his decision yesterday.
The latest volley in Sweet v. DeVos concerns the troubled Borrower Defense to Repayment program. The Obama administration enacted regulations governing this loan forgiveness program in 2016 to provide student debt relief to students who were misled, defrauded, or otherwise harmed by predatory colleges and universities – often, for-profit schools.
Under Secretary DeVos, however, the Department of Education has been trying to rewrite the rules governing the Borrower Defense program. New regulations that went into effect on July 1 of this year substantially weakened the Borrower Defense relief provided to student loan borrowers by increasing the burden of proof required to prevail, and imposing a strict statute of limitations.
Borrower advocates previously accused DeVos and the Department of Education of deliberately holding up the processing of nearly 170,000 Borrower Defense applications, in some cases for years. A U.S. Department of Education spokesperson previously disputed this, stating that some applications were in fact processed, and that the Department did not process additional applications due to ongoing litigation.
A recent preliminary settlement agreement in the Sweet v. DeVos case would require the Department to process the remaining thousands of delayed Borrower Defense applications. However, as the settlement was being finalized, student loan borrowers accused the Department of skirting the spirit of the settlement agreement by, essentially, arbitrarily denying relief to nearly everyone.
“Since the preliminary settlement in Sweet, [the Department of Education] has been issuing blanket denials of borrower defense applications,” said the Project on Predatory Student Lending — which is representing the borrowers — in August. “The notices don’t make any sense, [and are] in violation of the law and [settlement] agreement.”
Attorneys for the student loan borrowers notified the court of concerns that the Department was “issuing denials using boilerplate and conclusory language that does not provide any rationale for the decision… The language is formulaic and gives no indication that the Department has connected the evidence submitted by the borrower or otherwise possessed by the Department with its ultimate determination.”
The borrowers also noted that in some cases, the Department’s decisions were “nonsensical.” Citing an example, the brief pointed to a case where the borrower alleged that ITT Technical Institute engaged in misconduct related to “Educational Services.” The Department denied the borrower any relief, stating simply: “This allegation fails for the following reason(s): Educational Services.” In other cases, the Department indicates its decisions were based on unspecified evidentiary materials, which it then refused to provide to borrowers upon request. The Department disputed the characterizations of its Borrower Defense decisions.
This week, the court agreed with the student loan borrowers and rejected the proposed settlement agreement. “The Secretary’s new perfunctory denial notices undermine the proposed settlement,” wrote Judge Alsup. “The Court is disappointed that it has come to this.”
In a remarkably candid rebuke, Judge Alsup noted, “Simply put, where there’s smoke, there’s fire. After justifying eighteen months of delay largely on the backbreaking effort required to review individual applications, distill common evidence, and ‘reach considered results,’ Secretary [DeVos] has charged out of the gate, issuing perfunctory denial notices utterly devoid of meaningful explanation at a blistering pace.”
With the proposed settlement agreement denied, the litigation will now continue. And tens of thousands of student loan borrowers waiting for relief will continue to be in limbo.
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