House Democrats Allege ED Intentionally Froze Tool Meant to Assist Defrauded Borrowers

By Hugh T. Ferguson, NASFAA Staff Reporter 

Democrats on the House Committee on Education and Labor have obtained new documents that they say offer proof that Department of Education (ED) officials purposefully derailed an online tool meant to assist defrauded student loan borrowers and have bungled efforts to reinstate the website.

The documents obtained refer to a borrower defense resource designed to ease the application process for borrowers who were in many instances defrauded by for-profit institutions.

According to the documents, obtained by both the education committee and the House Oversight Committee, on May 21, 2020, the Office of Federal Student Aid (FSA) ordered all work on the borrower defense web tool to stop. 

An FSA program manager wrote that “FSA has made the decision to delay the implementation” and that “all work on borrower defense … should stop for now.” Just a few days later, on May 26, 2020, an FSA contracting officer followed up to “memorialize” the stop work order.

The committees allege that these documents “directly contradict vehement and public denials” from ED, citing a department spokesperson who on June 23, 2020 stated, “Anyone who says that there has been any effort by anyone at the Department to delay or obstruct the development of a new borrower defense form or website is lying.”  

“We are deeply troubled that the Department of Education halted a web tool to help simplify and streamline the process for defrauded students applying for relief,” Reps. Bobby Scott (D-Va.) and Carolyn Maloney (D-N.Y.), chairman and chairwoman of the House education and oversight committees, said in an October 27 joint statement. “Today, we are releasing further evidence that the Department of Education continues to undermine and harm these defrauded students at every turn. Regrettably, the Department lacks any credibility to carry out this program fairly for these borrowers and their families.”

While ED has taken steps to reimplement and redesign the website, the effort is estimated to cost $1 million in taxpayer money and will not be ready for use until at least November, according to a contract also obtained by the committees.

“These allegations are entirely false," Angela Morabito ED press secretary said via email. "Why would Department leaders interfere with the creation of a tool that implements the BD regulations promulgated in 2019 under Secretary DeVos’s leadership?  The truth is that FSA submitted to leadership what appeared to be a paper application template – one that was not well organized, seemed to conflate the 2016 and 2019 regulations, and failed to provide sufficient examples of the kinds of misrepresentations that make a borrower eligible for [borrower defense] relief."

Release of these new documents come on the heels of a ruling from a federal judge that rebuked and scuttled a borrower defense settlement over ED’s blanket denials of student loan relief claims.


Publication Date: 10/29/2020

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