California is suing the Trump administration for what it says is the U.S. Department of Education’s refusal to provide debt relief to more than 13,000 students that courts have found were defrauded by the since-shuttered for-profit Corinthian Colleges.
Attorney General Xavier Becerra filed the suit today in federal court in San Francisco against the federal department and Secretary of Education Betsy DeVos.
“After having their American Dreams stolen by a so-called higher education institution, Corinthian students are now being denied critical relief by a Secretary of Education hostile to their plight,” Becerra said. “It is hard to believe that we are forced to sue the Department of Education to compel Secretary DeVos to carry out the Department’s legal duty and help these students rebuild their lives.”
Nationwide, roughly 50,000 borrowers are waiting for the Education Department to approve their applications for debt relief promised to them under Obama administration rules following lawsuits against Corinthian.
The Department of Education has in the past contended that it needs more time to review the applications for debt relief. But in that period borrowers have seen their wages and federal tax returns garnished to pay for the student loans that they took out to attend schools operated by Corinthian.
The Department of Education did not respond to a request for comment.
Becerra’s complaint calls on the Education Department to process borrowers’ claims for debt relief, end debt collection on the loans those borrowers owe from when they were enrolled at Corinthian schools and to forgive their federal student loans.
The suit filed today says that since Trump became president, the White House has stopped processing the claims of students who were eligible under a federal debt-relief program called “borrower defense” that the Education Department granted in 2016 to the roughly 80,000 students nationwide affected by the fraudulent practices of Corinthian Colleges.
If a school misleads a student, or engages in other misconduct in violation of federal laws, students may be eligible for forgiveness of student loans by claiming a “borrower defense” against repayment.
According to today’s suit, between 2015 and Inauguration Day this year, the Education Department granted 28,000 borrower-defense claims totaling more than $500 million in debt relief. Since then, none have been approved. The suit says the department should process these claims because it had already determined under the Obama administration “that these students qualify for specific, expedited relief.”
Today’s suit is the next chapter in ongoing conflicts involving California, the Education Department and former Corinthian students.
Following a 2016 lawsuit led by former California Attorney General Kamala Harris, a judge issued a $1.1 billion verdict against the company for unlawful practices — including giving false job-placement figures to students and misrepresenting the transferability of classes to other institutions.
In a separate suit brought on by the Consumer Finance Protection Bureau in 2015, a federal judge ordered the company to pay $531 million.
“Unfortunately, the company’s bankruptcy letter meant Corinthian would never pay what it owed to students under these judgments,” a report written by Sens. Richard Durbin (D-Ill.) and Elizabeth Warren (D-Mass.) said in November.
That report was critical of the Education Department’s failure to implement the borrower-defense rules. Last week the department’s Inspector General issued a separate report saying the review of student’s borrower-defense claims should continue. That gave Democrats more ammunition to accuse Trump and DeVos of harming former students.
“Now Secretary DeVos has absolutely no excuse — it’s time to cancel these fraudulent loans,” Warren said in a statement on Monday.
In response, a spokesperson for the department was quoted in Inside Higher Ed saying that the report showed “the previous administration did not establish an adequate adjudication process for borrower-defense claims.”
The report noted the department downsized the staff contracted to process the debt-relief claims from 19 workers to six.
This is the third suit state Becerra has filed against the U.S. Dept. of Education. The past two also dealt with for-profit colleges. Today’s suit was filed in conjunction with a separate lawsuit filed by the Attorneys General of Massachusetts, Illinois and New York.
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