DOE Sued for Withholding Student Debt Relief Options
The New York Legal Assistance Group has filed a lawsuit in the Southern District of New York to compel the US Department of Education to release documents outlining how students who have been harmed and misled by unscrupulous institutions of higher education can assert their rights to have their federal student loans cancelled.
NYLAG submitted a Freedom of Information Act (FOIA) request to the Department on December 5, 2014 seeking disclosure of records related to student borrower options for seeking debt relief and related documents. To date, the Department has produced no documents in response to the request. This is despite the fact that 20 years ago the Department of Education was directed by Congress to establish policies and procedures for student loan borrowers seeking to have their federal loan debt cancelled based on the misconduct of the schools they attended.
“The continued delays of the Department are imposing significant harm on low income borrowers in the State of New York and elsewhere, who remain unaware of the procedures to assert defenses available to them regarding the repayment of their student loans, and the Department’s steps to implement the defenses guaranteed to borrowers under federal statutes, regulations, and the terms of their promissory notes,” said NYLAG Senior Staff Attorney Eileen Connor.
NYLAG’s action comes at a time when the Department’s failure to provide policies and procedures regarding borrower defenses to repayment has become a matter of public concern in light of the demise of Corinthian Colleges, Inc., a large chain of for-profit schools. The school’s predatory practices are the target of lawsuits by several state attorneys general, who, along with lawmakers and student advocates across the country, are calling for the Department to provide “clear guidance to all students on how to assert a claim for relief”.
Earlier this year, NYLAG submitted defense-to-repayment applications to the Department on behalf of clients who attended schools operated by the national for-profit chain Career Education Corporation (CEC). In 2013, the New York State Attorney General settled claims against CEC for myriad violations of New York consumer protection law. As has been the case with other students who have formally made defense-to-repayment requests, the Department has provided conflicting and confusing responses, offering virtually no guidance about how to assert these important rights.
The trillion-dollar federal student loan program is an important source of financing for student borrowers – in particular low-income borrowers. But they have also been used as a major source of revenue by for-profit colleges and universities that encourage students to enroll and to fund their education with federal loans through false and misleading representations to the students. A 2012 report of the United States Senate’s Health, Education, Labor and Pensions Committee, as well as other studies regarding for-profit colleges, has documented the schools’ abusive practices. Certain higher-education institutions have maintained their eligibility to participate in the program only by making false and misleading representations to the Department, as well as to state regulators and private accrediting agencies. These exploitative practices have caused borrowers to become saddled with extensive debt that the borrowers have little chance of being able to repay.
NYLAG provides free civil legal services to a large number of low-income student loan borrowers. NYLAG’s client base encompasses individuals who are most often targeted by abusive schools: those with low incomes, who are foreign-born, or who come from minority communities. NYLAG’s services include direct representation, case consultation, advocacy, community education, training, financial counseling, and impact litigation. In 2014, through NYLAG’s For-Profit Schools Project and related financial counseling services, NYLAG counseled approximately 500 individuals about their student loan debt.