Defrauded student borrowers still waiting for answers on debt forgiveness

Inside Subprime: December 15, 2017

By Caroline Thompson

We reported in October that U.S. Secretary of Education Betsey DeVos was considering alternatives to debt forgiveness for victims of for-profit college scams, and it seems like DeVos is making good on that threat – through apathy, if not through action.

A new report from the Department of Education’s Office of the Inspector General has revealed that tens of thousands of defrauded student borrowers who have applied for debt forgiveness under a federal guideline known as “borrower defense to payment” are still waiting to hear if their claims have been approved or denied.

The “borrower repayment statute” has been in effect since 1995. It was designed to help students who took out loans to attend universities that were later found to have engaged in dishonest and predatory behavior. Until 2015, the number of claims made under this statute was relatively low. But after for-profit chains such as ITT Technical College and Corinthian Colleges were shuttered amid a myriad of scandals, thousands of scammed former for-profit students began applying for loan forgiveness.

According to the report, between June 2015 and January 2017, more than 72,000 borrower defense claims were received by the Department of Education. Until then, less than 30,000 had been received in the statute’s 20-year history. The Obama administration approved roughly 31,000 of the newer claims in the last months before President Trumps inauguration, but since DeVos took charge of the DOE, the process has stalled. The report states that, of the nearly 26,000 applications that have been received since Trump has been in office, none have been approved, and two have been denied.

A PBS Frontline report stated that, “while 12,000 claims have been flagged for approval as of July 31, the applications await final sign-off, according to the report. Another 7,200 have been flagged for denial.”

In a joint statement, Democratic Senators Elizabeth Warren and Richard Durbin slammed DeVos for her department’s lack of action.

“Despite the growing backlog of borrower defense claims, the Department of Education, under Secretary Betsy Devos has demonstrated little interest in helping students get the relief to which they are legally entitled,” they wrote.

For more information on Betsey DeVos and the Department of Education, check out these related articles from Inside Subprime:

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