Betsy DeVos Faces Another Lawsuit Over For-Profit College Loans

Even though a court ordered the Department of Education to discharge — otherwise known as forgive — student loans taken out by people who attended for-profit colleges that were later shuttered, the agency has been slow to comply.

And now, Secretary of Education Betsy DeVos faces yet another lawsuit over the situation, highlighting her historically cozy relationship with these institutions.

The controversy in this case surrounds the Borrower Defense to Repayment Rule, instituted under the Obama administration. Students who attended schools that misled them or engaged in other forms of misconduct before closing down are eligible for loan forgiveness. If implemented as designed, the policy could wipe out $250 million in debt for 106,000 students who took out loans to finance educations that never materialized or didn’t come with the benefits they promised.

The problem is that DeVos is a fan of for-profit colleges in general, and she hasn’t moved to put this rule in practice. DeVos maintains that the current rule has too much leeway, and she claims to be developing another, better rule.

But the courts aren’t impressed. Last month, a judge ordered her to get a move on, calling the delays she created “arbitrary and capricious.” DeVos didn’t follow through, so now she’s being sued in an attempt to get her to comply with the court order.

The National Student Legal Defense Network brought the suit on behalf of the California-based Housing and Economic Rights Advocates. In a press release, NSLDN president Aaron Ament said: “The students we are trying to help have been doubly victimized – first by the for-profit colleges that deceived them, and now by the federal government that refuses to help.”

NSLDN says that borrowers deserve benefits — including discharge of these bad loans, reimbursement for payments made and clearing of their credit history to remove adverse events associated with these loans. In addition, defrauded borrowers should be eligible for new federal student aid to help them pursue their educations.

But this case isn’t the only instance in which DeVos has given for-profit colleges a leg up. This summer, she tried to absolve these institutions of the Obama-era requirement to disclose accurate information about graduation rates and employment statistics.

Many for-profit colleges use rosy and lofty claims about the status of their graduates as an enticement that don’t reflect reality. The “gainful employment” rule denied federal funding and guarantees for loans to schools that failed to comply with the goal of addressing the extremely large numbers of defaulting borrowers tied to misleading advertising practices.

In addition, the Department of Education has effectively starved out the staff designated to investigate claims made by borrowers seeking redress. There are no longer any full-time staffers in charge of processing borrower complaints. This slowdown drove the former student loan ombudsman at the Consumer Financial Protection Bureau out of his job; he was too frustrated with being stymied when it came to advocating for borrowers.

Notably, for-profit colleges have been a problem for a long time, and it’s a bipartisan issue. In the Reagan administration, Education Secretary William Bennett described these institutions as “an outrage perpetrated not only on the American taxpayer but, most tragically, upon some of the most disadvantaged and most vulnerable members of society.”