School-fraud claims slow

U.S. facing 65,000 loan forgiveness requests

WASHINGTON — Tens of thousands of former students who say they were swindled by for-profit colleges are in limbo as President Donald Trump’s administration delays action on requests for loan forgiveness, according to court documents.

The Education Department is sitting on more than 65,000 unapproved claims as it rewrites rules on for-profit colleges made during President Barack Obama’s administration. The rewrites had been sought by the for-profit college industry.

The industry has found an ally in Trump, who earlier this year paid $25 million to settle charges that his Trump University misled customers. For-profit college officials also believe they have allies among the new regulators in the Education Department.

In August, Education Secretary Betsy DeVos picked Julian Schmoke Jr., a former associate dean at DeVry University, as head of the department’s enforcement unit. Her choice for the agency’s top lawyer is a top aide to Florida’s attorney general who was involved in the decision not to pursue legal action against Trump University. More than 2,000 requests for loan forgiveness are pending from DeVry students.

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, but then 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 on Aug. 28.

Department spokesman 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.

She said students with claims pending are not required to make payments on their loans.

But Dieffenbacher says the delay is costing her family dearly.

“They should be protecting the students, because students were led to believe they were protected,” she said in an interview. “And they are not, they are protecting Corinthian Colleges and for-profit schools.”

Alec Harris, a lawyer with Legal Services Center of Harvard Law School who is representing Dieffenbacher, said the inaction 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 for-profit colleges that lured students into taking 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.

Under DeVos, no claims have been approved since she came to office seven months ago, according to Manning’s July response to questions from Sen. Dick Durbin, D-Ill., who is part of a group of lawmakers pressuring DeVos to accelerate the process. The department is in the process of discharging loans for claims that had been approved by the previous administration.

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.

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 Barack Obama and scheduled to take effect July 1.

DeVos’ announcement about the Schmoke hiring was met with criticism by Democrats. Sen. Chris Murphy of Connecticut tweeted, “This is a joke, right?”