65,000 left in limbo on for-profit college loans

Tens of thousands of former students who say they were swindled by for-profit colleges are being left in limbo as the Trump administration delays action on requests for loan forgiveness, according to court documents obtained by the Associated Press.

The Education Department is sitting on more than 65,000 unapproved claims as it rewrites Obama-era rules that sought to better protect students. The rewrite had been sought by industry.

The for-profit college industry has found an ally in President Trump, who this year paid $25 million to settle charges that his Trump University misled customers. And it’s yet another example of the Trump administration hiring officials to oversee the industries where they had worked previously.

In August, Education Secretary Betsy DeVos picked Julian Schmoke Jr., a former associate dean at DeVry University, as head of the Education Department’s enforcement unit. More than 2,000 requests for loan forgiveness are pending from DeVry students.

And for the department’s top lawyer, DeVos has tapped a top aide to Florida’s attorney general who was involved in the decision not to pursue legal action against Trump University.

The Obama rules would have forbidden schools from forcing students to sign agreements that waived their right to sue. Defrauded students would have faced a quicker path to get their loans erased, and schools — not taxpayers — could have been held responsible for the costs.

Now, in a filing in federal court in California, acting Undersecretary James Manning says the department will need up to six months to decide the case of a former student at the now-defunct Corinthian Colleges and other cases like hers. Sarah Dieffenbacher, a single mother of four from California, had taken out $50,000 in student loans to study to become a paralegal. She attended the now-defunct Everest College in Ontario. But then she couldn’t find a job in the field, defaulted on her debt and could face wage garnishment.

The Education Department “will be able to issue a decision with regards to Ms. Dieffenbacher’s Borrower Defense claims within six months, as part of a larger group of Borrower Defense decisions regarding similar claims,” Manning wrote to the court Aug. 28.

Department spokeswoman Liz Hill said the agency is working to streamline the process and resolve the claims as quickly as possible. “Unfortunately, the Obama administration left behind thousands of claims, and we will need to set up a fair and equitable system to work through them,” she said. Hill said students with claims pending are not required to make payments on their loans.

But Alec Harris, a lawyer with Legal Services Center of Harvard Law School who is representing Dieffenbacher, said the delay could put his client and her children on the street. “This is a Department of Education that has seemingly sided with industry and stacked the deck against former students of predatory for-profit schools every step of the way,” Harris said.

Reid Setzer, government affairs director for Young Invincibles, an advocacy and research group, said the department’s delay is harming thousands of students. “It’s kind of ridiculous,” Setzer said. “There have been massive delays since the change of administration.”

The Obama administration went hard after forprofit colleges that used false promises to lure students into taking out big loans. Chains including Corinthian Colleges and ITT Technical Institute were forced to close, and Obama’s Education Department approved about $655 million in loan cancellations for their students.

No claims have been approved since DeVos came into office seven months ago, according to Manning’s July response to questions from Sen. Richard J. Durbin (DIll.), who is part of a group of lawmakers pressuring her to accelerate the process. The department is discharging loans for claims that had been approved by the previous administration.

Among the claims still pending are more than 45,000 filed by Corinthian students and more than 7,000 filed by ITT students.

DeVos is working on rewriting two Obama-era regulations that were meant to prevent colleges from misrepresenting their services to students and from failing to provide students with an education that would enable them to find jobs.

In an interview with the Associated Press last month, DeVos said, “Let’s be clear, no student should be defrauded, and in case of fraud there should be remedy. But we also know this approach has been unevenly applied, and if there’s going to be regulation around some institutions, we believe it needs to be fairly applied across the board.”

Democratic attorneys general from 18 states and the District of Columbia filed suit against DeVos in July over the rules, which were finalized under President Obama and scheduled to take effect July 1.

“Since Day One of the Trump administration, Secretary of Education Betsy DeVos and the administration have sided with forprofit schools over students,” Massachusetts Atty. Gen. Maura Healey told reporters at the time. “For me and my colleagues, it’s simple: When students and families are cheated out of an education and taxpayers foot the bill, everybody loses.”