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Education department blames student loan backlog on the courts

The department said the courts are to blame for the backlog.

WASHINGTON, DC - MAY 22:  Education Secretary Betsy DeVos testifies during a House House Education and the Workforce Committee hearing on Capitol Hill, May 22, 2018 in Washington, DC. The hearing focus is on examining the policies and priorities of the U.S. Department of Education.  (Photo by Mark Wilson/Getty Images)
WASHINGTON, DC - MAY 22: Education Secretary Betsy DeVos testifies during a House House Education and the Workforce Committee hearing on Capitol Hill, May 22, 2018 in Washington, DC. The hearing focus is on examining the policies and priorities of the U.S. Department of Education. (Photo by Mark Wilson/Getty Images)

The Education Department released findings on Thursday that showed it received 35,000 new claims from students who said they had been defrauded by their colleges between June and September. The total number of approved and denied claims has not changed since then “as a result of ongoing litigation,” the department said in its report.

In October, U.S. District Judge Sallie Kim certified that more than 100,000 students defrauded by Corinthian Colleges make up a class to bring a lawsuit against Education Secretary Betsy DeVos after the department created a new tiered system that would prevent some defrauded students from receiving full loan forgiveness.

Those changes provided tiers of relief to compensate students who attended Corinthian Colleges, a now defunct for-profit chain that was found to have misrepresented job placement rates. The tiers were based on students’ current earnings from passing gainful employment (GE) program. If earnings were less than 50 percent of their peers’ earnings, students would receive full relief. But if their earnings were at 50 percent or more of their peers’ earnings, they would only receive partial relief. Since those earnings tend to be low, the new system ensured that students who worked minimum wage jobs would be punished.

At the time the tiered system was announced last year, the Social Security Administration told a Democratic staffer that it didn’t believe the use of earnings information was authorized. Judge Kim revisited the issue after students said their data was used improperly to create the average earning rule. Earlier this year, Kim issued a preliminary injunction to stop the department from collecting on student loans from borrowers who applied for debt relief. Kim also established that the department violated federal law when it shared borrower information to get earnings data, halting DeVos from continuing the practice.

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But the judge’s order doesn’t mean the department can’t still forgive loans for Corinthian students using another method for partial relief or give students full relief. It doesn’t prevent the department from processing other borrower defense claims using other methods that are actually legal, unlike the practice the judge struck down.

Lawmakers and consumer advocates have been putting pressure on the department to relieve debt for defrauded students for months. On Thursday, Sens. Elizabeth Warren (D-MA), Dick Durbin (D-IL), Richard Blumenthal (D-CT), and Sherrod Brown (D-OH) wrote a letter to DeVos asking her to provide student loan discharges to ITT Tech students under the Higher Education Act’s borrower defense authority. Senators described the long history of investigations of and lawsuits against the company for a number of practices, including predatory private loans and misleading claims about job prospects.

The department’s findings on Thursday also showed that, as of September 30, only 206 borrowers had loan discharges under the Public Service Loan Forgiveness program, which forgives debt from borrowers who work in public service for 10 years. Of 45,000 applications processed by the agency, 72 percent were denied because they reportedly did not meet program requirements. Another 27 percent were denied because of incomplete or missing information. The last time the department released these findings, in September, only 289 of 28,913 applications were approved.

Lawmakers and consumer advocates have also expressed concern about how the department makes decisions on public service loan forgiveness, arguing for greater transparency. Sens. Sheldon Whitehouse (D-RI), Tim Kaine (D-VA), Tammy Duckworth (D-IL), and Maggie Hassan (D-NH) told the Education Secretary in a letter that the agency was “significantly and needlessly restricting access” to the program in June. Borrowers have said the program is complicated to navigate and a 2017 Consumer Financial Protection Bureau report found that issues with servicing breakdowns and incorrect payment counts have been reported.

Although the department has indicated it will comply with its legal obligations toward the program, the department may not be enthusiastic about the program. Earlier this month, Diane Jones, principal deputy undersecretary at the Education Department, called the program a “disaster” and “budget gimmick,” according to a staff member of Generation Progress, a research and advocacy group focusing on young people and students. Jones then reportedly said that the department provides loan forgiveness only because it is legally obligated to, as the agency does not support the program.

Over the course of DeVos’ tenure, the department has taken every possible step to roll back efforts designed to protect student loan borrowers and reduce oversight for for-profit colleges, student loan servicers, and other companies looking to profit off of struggling students. Last year, the department announced it would halt implementation of the Obama-era rule that provides relief for students who had been defrauded by their colleges, a move that was later stopped by a federal judge.

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A recent report found that the department and the Consumer Financial Protection Bureau hid a report on the regulation of campus financial products. In November, the agency shrugged off findings that Navient, the third largest student loan servicer in the country, directed borrowers toward higher cost repayment plans and did not offer better options. Furthermore, DeVos has reversed Obama administration directives that were aimed at making it easier for borrowers to pay back their student loans and helped hold student loan servicers accountable.