Group Sues DeVos for Failing to Automatically Cancel Loans of Students Whose Schools Closed

By Joelle Fredman, NASFAA Staff Reporter

A California advocacy group sued Education Secretary Betsy DeVos Tuesday for denying students whose schools closed before they could earn degrees of automatic loan cancellation—a policy established by the Obama administration as part of the borrower defense to repayment regulations.

The group, the Housing and Economic Rights Advocates (HERA), argued in the lawsuit that the Trump administration has “unabashedly and intentionally refused” to apply the policy, which calls for the Department of Education (ED) to automatically forgive the loans of students whose schools closed on or after Nov. 1, 2013 and did not re-enroll in other Title IV institutions within three years of the closure. Currently, according to HERA, students must apply for such loan forgiveness.

ED wrote in 2016 that the motivation behind the automatic cancellation policy was that almost half of borrowers who were eligible for loan forgiveness based on those qualifications did not apply for the discharge. According to HERA, “tens of thousands of borrowers who attended approximately 1,400 campuses that closed from Nov. 1, 2013 until three years prior to the filing of this complaint are presently entitled to have their federal student loans discharged without submitting an application.”

“Students affected by these closures are often adults with limited economic means…. automatic closed school discharge is especially critical for these borrowers. Students who do not complete their educational programs are among the most likely to default on their student loans, leaving them worse off than before they enrolled: stuck with a continually increasing debt load, no diploma, and bleak career prospects,” HERA wrote.

HERA argued that it has been harmed by DeVos due to the number of resources it has had to dedicate to students asking for help with representation to obtain relief. The group asked that the courts mandate that ED immediately implement this policy.


Publication Date: 11/14/2018

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