Betsy DeVos is giving defrauded student debtors the back of her hand
From the day she took office as Secretary of Education, Betsy DeVos has tried to make it more difficult for students to free themselves from loan obligations incurred on the basis of false promises by college recruiters about educational services, the likelihood of earning credits transferrable to other institutions, post-graduate employment, and salary prospects. With the publication of a new Department of Education regulation, which promises to save taxpayers more than $11 billion, DeVos is giving these young men and women the back of her hand.
In 1994, Congress authorized the Department to specify when a borrower might assert a defense to repayment of education loans. The issue was mostly dormant until 2015, when the for-profit Corinthian Colleges went bankrupt, leaving tens of thousands of students, enticed to enroll by deceptive recruitment practices, with substantial loans and worthless academic credits.
The Obama administration proposed new loan forgiveness options in June 2016, but did not issue final regulations until a few days before the 2016 presidential election. Those regulations were scheduled to go into effect in July 2017.
Enter Secretary DeVos.
Under the Obama rules, she complained, “all one had to do was raise his or her hands to be entitled to so-called free money.” When she signed off on claims already approved by her predecessor, DeVos added “with extreme displeasure” below her signature. DeVos then opposed granting relief to Corinthian students who had somehow managed to earn a decent wage.
Last year, Magistrate Judge Sallie Kim of the U.S. District Court in San Francisco rejected that approach, finding that the Department’s use of income data violated the students’ privacy. This year, Judge Kim found Secretary DeVos in contempt of court for continuing to collect on loans of some 16,000 students, despite the judge’s prior order, and fined her $100,000. The case is on appeal in the Ninth Circuit, but in the meantime, borrowers have been left holding the bag. Between June 2018 and June 2019, the Department has not approved a single new claim. By then, some 210,000 claims were pending, almost double the number awaiting resolution a year ago.
In August, the DOE made it harder than ever for defrauded students to obtain relief. Under the new rules, they must demonstrate financial harm (by showing that they searched unsuccessfully for employment in their field). More importantly, they must prove that they reasonably relied on misrepresentations in deciding to obtain their loans, and that the specified misrepresentation “was made with knowledge of its false, misleading, or deceptive nature or with a reckless disregard for the truth.” With little access to attorneys or discovery, the rules, as one observer has noted, require students “to submit evidence [they] do not have and cannot get.”
And that’s not all.
The DOE now requires students to apply individually for relief and permits institutions to use pre-dispute arbitration agreements and class action waivers as a condition of enrollment, provided the schools make “plain language-disclosures” about these processes. Such agreements, of course, keep claims out of the courts, where other students and the public at large might learn about them. Class action waivers prevent students, many of whom lack the resources to pursue legal remedies on their own, from sharing the costs and burdens of litigation.
Secretary DeVos’ embrace of a simplistic version of caveat emptor ignores the fact that predatory schools target unsophisticated and vulnerable populations who lack financial resources and desperately seek an education that will prepare them for a meaningful career.
Defrauded student debtors are victims. They — and not the victimizers — deserve protection from the Department of Education.
Glenn C. Altschuler is the Thomas and Dorothy Litwin Professor of American Studies at Cornell University. He is the co-author (with Isaac Kramnick) of Cornell: A History, 1940-2015.
David Wippman is the President of Hamilton College.