Devos Refuses To Forgive Student Debt For Those Defrauded By For-Profit Colleges
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Education Secretary Betsy DeVos is locked in a standoff with a powerful Democrat on Capitol Hill. Virginia's Bobby Scott is chairman of the House Education Committee. He's asked repeatedly for DeVos to testify, and she has so far refused. Scott has even threatened to subpoena DeVos. At stake in this standoff are the financial futures of more than 200,000 student borrowers. Here's NPR's Cory Turner on what this fight is all about.
CORY TURNER, BYLINE: The short answer is it's about an old wonky rule from 1995 called borrower defense. The long answer begins with a metaphor about a shady practice once used by some used car dealers.
JAMES KVAAL: They would sell junky cars and go out of business, and buyers were left with a car that didn't run and still owing loans to the bank.
TURNER: James Kvaal worked on borrower defense in the Obama administration and now heads the Institute for College Access and Success, and he says this same kind of fraud was happening to college students. Several for-profit chains, including the now-defunct Corinthian Colleges, misled borrowers about their job prospects and earnings after graduation, and that left many students with the degree equivalent of a lemon. But Kvaal says it's an old idea in consumer protection law that when a seller commits this kind of fraud, lenders should also be on the hook, and in this case, that's the U.S. government.
KVAAL: So if a student takes out a federal loan and that loan is connected with fraud, deceptive statements, illegal conduct, then the student has a right to get that loan forgiven.
ALICIA DAVIS: The lady pretty much sold me a lie.
TURNER: In the mid-2000s, Alicia Davis of Orlando, Fla., enrolled at Florida Metropolitan University, which was part of Corinthian. She went there, Davis says, because a school representative made some irresistible promises.
DAVIS: They told me that you were going to get a job with this specific salary during this time, you know, and they provided me an image of how their college is that didn't exist.
TURNER: Davis attended for about a year. Disillusioned and deeply in debt, she took out new loans to start over at her local community college. She later earned a bachelor's and master's degree but has refused to pay down those original loans.
DAVIS: They're defaulted and delinquent because I told them, I'm not paying you because this is a scam.
TURNER: Davis filed a borrower defense claim in 2015. Education Secretary Betsy DeVos has tried to delay using the old rule to help defrauded students like Davis, and that's because, DeVos argues, the old rule is too lenient. In 2017, Davos complained that, quote, "All one had to do was raise his or her hands to be entitled to so-called free money." When she had to sign off on thousands of old claims, DeVos added three words below her signature - with extreme displeasure.
Today Alicia Davis is one of more than 200,000 borrowers who are still waiting for their claims to be processed. She's even joined a class action lawsuit to force the department to move forward. In March, in a Senate hearing, Democrat Patty Murray asked Secretary DeVos if the Department had approved even one borrower defense claim in the past six months.
(SOUNDBITE OF ARCHIVED RECORDING)
BETSY DEVOS: I believe so. We're reviewing them regularly and...
PATTY MURRAY: How many?
DEVOS: I don't have the specific number.
MURRAY: Does any of your staff know how many?
DEVOS: I'd be happy if you'd like to submit a question for record.
MURRAY: Yeah, no. I'd like to know if any of your staff members behind you have an idea of when that - how many have been approved.
TURNER: That awkward silence is Senator Murray staring at the two aides seated behind DeVos until they shake their heads no. After the hearing, the department did answer Murray's question in writing. It had not approved a single borrower defense claim in nearly a year since June 2018. Instead of granting defrauded borrowers full loan forgiveness, the department has tried to use student earnings data to make a new argument that defrauded borrowers who end up earning a decent wage shouldn't have their loans totally forgiven. A department spokesperson tells NPR the old all-or-nothing strategy was essentially unfair to taxpayers.
Toby Merrill is director of the project on predatory student lending at Harvard and filed an injunction that stopped the department's use of earnings data.
TOBY MERRILL: Our clients aren't asking the government for a handout or a bailout. They're asking the government to follow the existing law.
TURNER: A judge recently found DeVos in contempt of court and fined her for continuing to collect on the loans of thousands of Corinthian students. The department said those collections were a mistake. It's unclear how or when, at this point, the department will process those 200,000 outstanding claims, which is exactly what the Democratic Chairman of the House Education Committee Bobby Scott wants to know.
BOBBY SCOTT: We've been asking for information since last year.
TURNER: That's why Scott has threatened to subpoena not only Education Department documents related to borrower defense but also Betsy DeVos herself. He says making these indebted borrowers wait - in many cases, for years - is unfair.
SCOTT: You can't buy a house. Your credit is all messed up. You ought to be relieved of this if you've been defrauded, and that's exactly what's happened in many of these schools.
TURNER: An Education Department spokesperson tells NPR, quote, "We've offered to give Chairman Scott and his colleagues the facts," closed quote. Instead of DeVos, the department offered the head of its student loan office. The department spokesperson also tells NPR, quote, "we're working really hard to comply with lawful oversight activities, and they won't take yes for an answer," closed quote. Meanwhile, yes is the one word the department is not ready to say to those 200,000 borrowers who are still hoping for loan forgiveness.
Cory Turner, NPR News, Washington.
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