J Pat Carter/AP
Nearly 16,000 federal borrowers who were misled by for-profit colleges will have their debts wiped out by $415 million, according to the US Department of Education. These borrowers — who attended DeVry University, ITT Technical Institute, and other schools — will receive relief through a legal provision known as the borrower’s defense, which promises loan relief to defrauded borrowers.
With the announcement, the Biden administration says it has approved approximately $2 billion in loan relief for more than 107,000 borrowers through Borrower Advocacy.
Wednesday’s news stands out not only for the borrowers it will help, but because it’s the first time the department has said it will grant defense requests to borrowers, acknowledging that students were defrauded, while the school accused of defrauding them, DeVry University, remains open for business and still enjoys access to millions of dollars in federal student loans.
According to the department, approximately 1,800 DeVry students will receive more than $70 million in loan relief after the department “determined that the institution had made numerous misrepresentations about its placement rates.”
The department also said it expects the number of approved applications from DeVry students to increase and that it “will seek to recover the cost of DeVry’s releases.”
“The Department remains committed to granting discharges to borrowers when evidence shows their college has violated the law and standards,” said U.S. Secretary of Education Miguel Cardona. “Students rely on the sincerity of their colleges. Unfortunately, today’s results show too many cases in which students were misled by loans from institutions or programs that could not keep their promises.”
DeVry University did not immediately respond to a request for comment.
DeVry has been in hot water before
The announcement is the latest standoff in years of tension between DeVry and the federal government. In August 2015, the Department of Education demanded that DeVry prove its common advertising claim – that since 1975, 90% of its job-seeking graduates have found employment in their field within six months of graduation. graduation – or stop doing so. In October 2016, DeVry said he lacked data to support the claim and agreed to quit.
Then, in December 2016, DeVry agreed to a $100 million settlement with the Federal Trade Commission, following similar complaints that its advertising was misleading.
It was this 90% assertion that the department used to justify its latest decision, to approve the DeVry borrowers’ defense requests. The department says that upon investigation, it found that DeVry’s placement rate was instead about 58% and that “more than half of the jobs included in the claimed 90% placement rate were filled by students who earned them long before graduating from DeVry and often before even enrolling.”
“These jobs were not attributable to a DeVry education,” the department said, “and their inclusion was contrary to the plain language of the 90% claim. In addition, DeVry excluded from its calculation a large number of graduates who were in fact actively seeking work simply because they did not conduct a search in the manner that the University’s Career Services Department preferred.”
Despite these findings, the department has made it clear that because DeVry stopped making this misleading claim in 2016, he will not lose access to the federal student aid program — a move that would be potentially devastating for a school like DeVry, where the vast majority of students receive federal loans.
Pressure to help defrauded borrowers has grown
The department has come under enormous legal and political pressure to help defrauded students. Much of this pressure began in June 2019, when the Predatory Student Loans Project sued Trump’s Education Department (Sweet v. DeVos), demanding that it process claims from more than 200,000 borrowers. who said they were defrauded by their colleges.
Trump Education Secretary Betsy DeVos was an outspoken champion of the for-profit college sector and openly opposed the use of borrower defense to offer students full or even partial loan relief. Under his watch, the review of applications slowed down, then stopped altogether.
In early 2020, after the Sweet v. DeVos interim settlement, the department sent thousands of denials to borrowers — though those denials were vague and unexplained.
“We don’t think their evidence was properly considered, and we certainly don’t think they were given an adequate explanation of why their claims were denied,” said Eileen Connor, director of the project on predatory student loans and lead plaintiff counsel.
A judge agreed with Connor, and in late 2020 the department agreed to halt blanket denials until the case was resolved.
This case, now Sweet v. Cardona, along with the borrower’s defense backlog, hangs over the Biden administration like the sword of Damocles. According to federal data, more than 85,000 claims were pending adjudication as of January 2021, and another 137,000 had been denied based on DeVos’ interpretation of the rule. Wednesday’s announcement not only helps the department reduce that backlog, but it also allows the Biden administration to take credit for the loan relief efforts that a lawsuit or settlement in the Sweet case would have. probably have to.
Over the past year, Biden’s education department has made modest progress in reducing that backlog — announcing in June that it would approve another 18,000 borrowers from the ITT Technical Institute and, in July, more than 1,800 applications from students in three small schools.
But the most recent federal data on borrower defense claims shows the backlog at the end of September was actually higher (nearly 88,000) than it was when Trump left office.