On Sunday, two borrowers filed a lawsuit against Secretary of Education Betsy DeVos and student loan servicer Navient. The lawsuit was filed in New York by two women who claim they were defrauded by the for-profit college Sanford-Brown Institute.
The two borrowers are frustrated by the Department of Education’s slow pace on loan forgiveness for defrauded students. They claim that attending Sanford-Brown did more harm than good because the college misled them in regards to program accreditations and career prospects after college.
Sanford-Brown closed in 2015, leaving many of its 30,000 students with hefty amounts of student loan debt and no degree to show for it. The lawsuit cited numerous occasions where the school violated laws as evidence of their eligibility for loan forgiveness.
The Department of Education is currently rewriting rules put in place by President Obama in 2016. Known as the borrower defense rule, the provision originated in 1994 and promised loan forgiveness to students who were defrauded by their colleges.
The rule was widely unheard of up until the sudden collapse of several for-profit colleges in 2015. Suddenly, the Department of Education was flooded with thousands of requests from borrowers asking to have their loans forgiven. The Department proposed new regulations to the rule which were supposed to take effect on July 1, 2017.
However, the process came to a screeching halt this past June when Secretary DeVos froze the borrower defense rules. DeVos said that she planned to pursue a rewrite of the rules through a process called negotiated rulemaking.
Then in October, the Department of Education issued another delay which would keep it from going into effect until 2019 until the bureaucratic rewrite is complete. Since then, 90,000 borrowers have been left in limbo as they wait to see if their borrower-defense claims will be resolved.
And according to Toby Merrill, a lawyer with Harvard University, this isn’t legal. “People’s rights not to pay for defective products [are] well established in law…the legal rights of borrowers continue to exist and are enforceable against the government just as they are against private parties.”
DeVos drew fire from legislators and student loan activists alike after freezing the borrower defense rules. Attorneys general from 18 different states filed lawsuits hoping to have the rules enforced. However, this is one of the first times that borrowers have attempted to bring suit against the Education Secretary.
This could be a sign that many borrowers are fed up with taking a “wait and see” approach to loan forgiveness. And it remains to be seen if other frustrated borrowers will follow suit and attempt to pursue legal action as well.
At any rate, this development is a byproduct of the climate of student loan forgiveness which generally involves disappointment and frustration. Within the last month, the idea was floated that defrauded student loan borrowers from for-profit colleges would only receive partial loan forgiveness as opposed to the promise of full loan forgiveness. With that in mind, it shouldn’t come as a surprise that disgruntled borrowers are starting to take action rather than wait around for the prospect of forgiveness.
Author: Andrew Rombach
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