Student Loan Forgiveness Program Made Decisions in 12 Minutes, Documents Say

Former Education Minister Betsy DeVos made no secret of her disdain for a program designed to provide federal loans to borrowers withdrawn from schools that defrauded their students. Calling it a “free money” giveaway, she languished hundreds of thousands of claims for years, and reduced the relief given to some successful applicants to $ 0.

Then, after a class action lawsuit made it impossible to stand any longer, her agency set up a sort of assembly line of denial.

In Ms. DeVos’ last year in office, her agency denied almost 130,000 applications – far more than the 9,000 refusals in the last five years – using a system that, according to the documents submitted by the internal education department, put employees under pressure to process applications within minutes Federal court.

The department wanted to process 5,000 applications a week, the documents show – a standard by which agency staff had to assess claims that could span hundreds of pages in less than 12 minutes. Those who did it faster were eligible for bonuses. those who took longer risked being fired. Agency staff turned down claims against hundreds of schools for failing to provide written evidence that borrowers were never required to submit. And the department often ignored its own findings of school misconduct when verifying claims made by its students.

“The majority of applications are denied,” wrote Colleen Nevin, a career officer who ran the claims division, in a 2019 memo. Her group has assessed cases with 1,400 schools and approved claims with only three schools. All approvals were based on criteria set before Ms. DeVos took office.

The documents were obtained by court order from attorneys in the class action lawsuit that involved more than 200,000 individuals who had made claims for repayment under a repayment utility known as borrower defense. The program enables borrowers who have been significantly misled by their schools to make federal student loans available to them. After underutilizing the system, it was flooded with demands during the Obama administration after government action toppled a number of large for-profit chains.

Most of those claims remained when President Donald J. Trump took office, and the lawsuit filed in San Francisco federal court in 2019 sought to force the department to review claims that had been debilitating for four years. In a settlement agreement reached last year, the department agreed to speed things up and make decisions.

Within seven months, the department rejected 91,000 applications – a spate of rejections that the borrower’s lawyers described as “almost worthless pieces of paper that do not explain their decisions.”

Nearly 95 percent of borrowers in the case whose claims have been decided have been denied, according to court records. Most, if not all, of the applications approved related to applications that the Agency was forced to grant due to precedents set before Ms. DeVos took office.

After the borrowers’ attorneys complained, Judge William Alsup rejected the settlement in October. His ruling strongly criticized the division for “issuing superficial denial notices that rapidly contained no meaningful explanation,” and ordered the division to produce records – a rare step in litigation where decisions were made by federal agencies.

A message for a representative of Ms. DeVos was not returned. Ms. Nevin, who still heads the borrower’s defense team, didn’t respond to a message asking for comment.

Education has begun dismantling the previous government’s approach to debts from defrauded borrowers.

Ms. DeVos’s successor, Miguel Cardona, ended Thursday retrospectively reversing Ms. DeVos’s policy of partial relief and ordering the agency to cancel $ 1 billion in debts that 72,000 people with successful Claims were owed – all for reasons established during the Obama administration.

“This is an important first step for the department to address borrowers’ defense claims and underlying regulations,” said Kelly Leon, a spokeswoman for the education department, on Friday. “We will take further measures in the future, including re-regulation.”

But that action did nothing to help people like Theresa Sweet, the lead plaintiff in the class action lawsuit, whose request for forgiveness was denied after a four-year wait last year. She graduated from the Brooks Institute of Photography in 2006, a nonprofit school that closed a decade later after her accreditor accused her of “deliberately misleading” prospective students.

Ms. Sweet, who was hoping to become a professional photographer, borrowed more than $ 100,000 to cover the school’s high tuition fees. Brooks told prospective students that his graduates were in great demand and that his career counselors would help them find jobs. In reality, it offered nothing more than summaries of Craigslist postings for unpaid internships and gig work, she said.

Judge Alsup’s decision in October calling the department’s case law process “disruptive Kafkaesque” was a balm, she said.

“When the judge said the students were injured, I thought someone would finally come out and say it,” Ms. Sweet said. “I literally lost track of the number of people who reached out to me and told me they were considering suicide because their debt had so many negative effects on their lives.”

The agency’s newly published documents describe the denial of tens of thousands of requests for assistance, even when the department itself concluded that the schools had been guilty of misconduct.

More than 200 former students have alleged Empire Beauty School, a franchise chain that trains hairdressers and makeup artists. Several borrowers said their school took out loans on their behalf without their knowledge.

The Education Department’s own enforcement unit had fined four Empire admissions officials for forging or forging student loan records. Three have been convicted of fraud for their actions.

However, this did not result in a “pattern” of wrongdoing, the department decided. It denied all aid requests from the borrowers. (Claims by borrowers “were not brought to Empire for response,” a school representative told the New York Times, adding that Empire “discovered the activity and reported the individuals involved itself.”)

Carrington College’s Phoenix campus, which conducts professional programs such as dental and nursing education, has repeatedly misrepresented the careers of its graduates, a Department of Education investigation found. Almost a quarter of the school’s work claims examined by the department between 2012 and 2014 were false. The college did not respond to a request for comment.

However, when more than 300 former Carrington students made claims that they had been misled about their career prospects, the department denied their claims. The appraiser wrote that the borrowers had provided no evidence and that the agency “otherwise has no evidence to identify a pattern or practice for this type of wrongdoing”.

The reviewers were under considerable pressure to process claims quickly, as the new documents show. To clear the backlog, the agency hired dozens of staff and contract lawyers. Her assigned goal was to review at least five cases an hour. Those who did more could make extra money and free time. Those who did less were put under “enhanced surveillance” by their managers and had to take remedial action, including dismissal.

Officially, that system remains in place, said Eileen Connor, the litigation director for Harvard Law School’s predatory student loan project that represents borrowers in class action lawsuits. Applicants will have no hope of prevailing until the department takes its assembly line approach down and gives applications the consideration they deserve, she said.

“There was all of this infrastructure to process claims without really fighting with them,” said Ms. Connor.

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