Education

The U.S. Department of Education Is Working On A Plan To Provide Student Debt Relief, Very Slowly

CREDIT: Jacquelyn Martin, AP

On Thursday, the U.S. Department of Education issued a progress report for those seeking student debt relief who say they were defrauded by their for-profit colleges, but for many former students, the process may drag out for a long time.

The announcement from the department was the culmination of efforts that started last year when The Debt Collective, a group born out of Occupy Wall Street, began a campaign called Strike Debt. Activists purchased thousands of dollars in student loan debt owed to the for-profit Corinthian Colleges chain, which in turn voided millions in student loans. Corinthian Colleges, a for-profit college chain, which owned Everest and Heald, recently shut down all of its campuses after receiving fines from the department regarding its misleading job placement rates.

The Debt Collective’s actions brought national media attention to Corinthian Colleges’ conduct, which eventually led to Corinthian students meeting with the department and asking for relief from their student debt. They cited the borrower defense to repayment, which would allow for borrowers to submit a claim to get debt relief if their college committed fraud, which has been in place since 1994, but the department had not yet developed a process for students to pursue that claim.

Former Corinthian students and other for-profit college students, who have attended for-profit colleges such as The Art Institutes, which belongs to EDMC, or ITT Educational Services, Inc., have been waiting for the department to jumpstart the process for many months. The department hired Joseph Smith, who has experience with mortgage settlement claims, as a special master for borrower defense to handle the process. Smith said he is considering the possibility of allowing students to apply as a group instead of individually. Smith announced he would allow state attorneys general to send evidence they’ve collected in order to group the claims and expedite the student debt forgiveness process.

“I’m leaving no stone unturned in exploring this issue,” Smith said during a press conference held on Thursday.

Smith said the department will establish “clear rules about what evidence of wrongdoing is sufficient to provide relief for borrowers” but the department hasn’t yet specified what the burden of proof would be. The next progress report will be released on November 15. In the meantime, Smith will review claims where “facts and law are clear.” He cited Heald Colleges in California, Hawaii, and Oregon as examples of strong cases of fraudulent activity.

Of the 7,815 Corinthian students who have applied for loan forgiveness, 3,128 applications were approved by the department. The approved applications represent $40 million in loans. Students have borrowed $3.2 billion in federal loans since 2010, department of education officials said during the call. For Corinthian students who attended Everest Colleges, the department said it has put those loans in forbearance, where they will accrue interest, until those applications can be considered.

When the department was asked what it would do for for-profit colleges that are not part of the Corinthian Colleges chain, Smith said the department hadn’t begun to focus on those students’ claims yet. EDMC, which owns the Art Institutes, has been investigated for its job placement claims and recently shut down many of its campuses. Former students of the college chain, as well as those who attended ITT Educational Services colleges, have been organizing with The Debt Collective.

“We have focused intently on Heald claimants where we have a very large number. Everest will be our second target,” Smith said. “To be frank, we have paid much attention yet to the others. We’re getting smart young lawyers starting right after the holiday … But right now we’re focusing where the big numbers are and where the likely early relief is going to be. We have not paid a lot of attention to the others.”

Luke Herrine, a Debt Collective organizer, said he is frustrated with what he sees as a narrative the department is swooping in to save students, when the department hadn’t acted for years on holding for-profit colleges accountable for dubious practices. He is also worried that the department is trying to drag out the process in the hopes that the issue will fade from public consciousness.

“Students made it so they couldn’t ignore that students were not only morally but legally entitled to that relief and that they had to figure out how they were going to deal with the potentially massive amount of relief they would have to provide within the law. Since then, it has been an extended attempt to draw out the process so they can for example go on certain press outlets and write editorials about how they’re addressing the issue without actually having to foot the bill for student relief,” Herrine said, referring to an editorial U.S. Department of Education Secretary Arne Duncan wrote on student debt relief.

Herrine, as well as others in the Debt Collective, have said that Corinthian students should receive automatic relief given the fact that the department has already investigated Corinthian Colleges. He added that the department needs to be more proactive when it comes to monitoring for-profit colleges in the future.

“An application-based process is just a way to provide less relief, which is just a way to lower the bill the [U.S. Department of Education] has to pay. If that is what collective relief means, it’s woefully and deeply inadequate,” Herrine said. “I hope that the department realizes that it has to start doing investigations and that it has to start taking earlier steps to crack down on schools, and a competent and willing department would do that.”

Herrine said there are signs of hope, however, that the department could work toward a process that would help many for-profit college graduates and former students.

“I guess a couple of encouraging signs is that no final decisions have been made, and there are still open possibilities for creating a real collective relief process that doesn’t require applications. There is a possibility that lawyers are on board and that they will conduct an investigation. He hasn’t closed off the possibility … He claims that the main focus has been on providing students with all of the relief that they deserve, and if that’s the real goal then that is heartening,” he said.