Education Secretary Betsy DeVos rolls out new method for approving student debt relief applications

“We cannot condone fraud in higher education, nor condone the furious giving of taxpayers’ money to those who have submitted a false application or who are not eligible for aid,” DeVos said in a statement Tuesday. . “This new methodology treats students fairly and ensures that taxpayers who did not go to college or who faithfully repaid their student loans do not bear the costs of student loans for those who were not harmed. “

Higher education experts warn that the new formula could lead to far fewer loan cancellations than the previous plan. It compares the median earnings of graduates who applied for debt relief with those of graduates of comparable programs. The greater the difference, the more relief the claimant will receive.

Full loan forgiveness will only be granted to defrauded students who have completed a program in which graduates earn the least amount of money compared to their peers across the country. The policy is a stark contrast to the Obama administration’s practice of awarding full relief when it determines a college has committed fraud.

In May 2018, a federal judge blocked DeVos’ first attempt to write off only part of the debt accumulated by a group of former Corinthian Colleges students, ruling that the department had violated federal laws in the way it used income data from the Social Security Administration. The case culminated in DeVos being held in contempt on Oct. 24 for violating a court order to stop collecting loan repayments from former students of the defunct for-profit chain.

The Trump administration has argued that the Corinthian case has prevented the Department of Education from issuing rulings on the 227,000 claims filed by borrowers – most of whom attended for-profit colleges. The new methodology will not apply to the students in the Corinthian trial, as Magistrate Judge Sallie Kim of the U.S. District Court for the Northern District of California must approve any new relief formula applied to the class.

House Democrats are investigating the administration’s refusal to act on the claims and its efforts to limit debt cancellation. DeVos is scheduled to testify before the House Education Committee on Thursday after Chairman Robert C. “Bobby” Scott (D-Va.) threatened to subpoena him for documents detailing the claims handling by the department.

“The Department of Education clearly has the authority to provide full debt relief to students defrauded by their college,” Scott said in a statement Tuesday. “Rather than simply wield that authority and provide life-altering relief to defrauded borrowers, the Department is inventing another system to provide students with less relief than the law allows.”

Secretary is losing support from some White House officials who say she hasn’t done enough to advance a vision for the administration, administration officials say who spoke to the Washington Post on condition of anonymity. Some in the White House blame DeVos for the court defeats, including the contempt conviction.

DeVos could create more headaches for herself and the department with her latest push to limit student debt forgiveness to defrauded borrowers, as the plan could lead to new litigation.

Harvard University’s Project on Predatory Student Lending, a legal aid group representing Corinthian students, has argued that any form of partial relief is illegal under the Debt Relief Act of 1995. which allows defrauded students full loan forgiveness. Toby Merrill, director of the Project on Predatory Student Lending, said the formula is also an arbitrary way to grant loan forgiveness.

“It still has the same problem of geographic inconsistency, time inconsistency,” Merrill said. “What people earn across the country is so different, so these averages are just going to produce statistically and mathematically absurd results applied to individuals, and really don’t measure the harm they’ve endured.”

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