DeVos defends restriction of debt relief for defrauded students

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WASHINGTON — Education Secretary Betsy DeVos on Thursday vigorously defended her decision to grant partial or no loan relief to tens of thousands of students who have been misled by for-profit colleges accusing the Obama administration of over-promising debt relief.

Appearing before the House Education Committee, Ms. DeVos faced Democrats who accused her of unfairly denying aid to deceived students left with worthless degrees, who sought the cancellation of the debt. A once obscure rule, called “defense of the borrower to repaymentbecame one of the most beleaguered in the department after the collapse of two chains of for-profit universities, Corinthian Colleges and the ITT Technical Institute.

The Department of Education found that the channels had misled students with false claims about their job prospects and salaries, and the Obama administration determined that the students were entitled to full relief.

According to an internal document reviewed by The New York Times, and reported for the first time per US News & World Report, the department will begin notifying about 17,000 borrowers — about 6,000 from Corinthian — whether they will get full loan relief; 95% will be refusals.

DeVos said her department’s overhaul of the debt relief rule marked a “course correction” from the previous administration, which she said had “weaponized” it to target colleges at profit and provide “blanket” relief to borrowers who may not have earned it.

“I understand that some of you here just want a blanket pardon for anyone who raises their hand and files a claim, but that’s just not fair,” Ms DeVos told lawmakers.

The hearing was called as the Department for Education began telling borrowers who claimed to have been defrauded how much debt they will have to repay. His new rule, which takes effect in July, will require applicants to demonstrate personal financial harm, even if their colleges have been proven to mislead students. This week, the department announced a new methodology that provides relief to applicants according to the income of their comrades.

“If someone went to one of these programs hoping to become a nurse, for example, and now sells clothes in a department store, that doesn’t mean they haven’t been defrauded,” protested Rep. Suzanne Bonamici, a representative from Oregon. Democrat and former consumer protection lawyer.

Committee members used their constituents to illustrate the effect Ms. DeVos’s politics will have: a Corinthian borrower who dead while waiting for his loan to be forgiven; a single mother with a sick son who must take out loans for hospital visits because she is still saddled with debts from an education program that no longer exists; a disabled veteran who completed an ITT program using funding from his GI bill but ended up with a $50,000 student loan, no job or degree.

“Doesn’t a university have a responsibility to provide what it claims to provide? asked Rep. Susan A. Davis, Democrat of California. “There is literally no other consumer protection that doesn’t restore a full refund to a fraudulent product.”

Ms DeVos argued it was “probably the case” that Corinthian colleges were cheating on students, but she also said she believed the “previous administration basically forced schools like Corinthian out of business” with onerous financial restrictions. She fended off questions about an investigation by career staff, unveiled in January 2017 memos published by NPR on Wednesdaywhich concluded that Corinthian students deserved full loan forgiveness because they received no educational benefit.

“I disagree with that narrative,” she said. “I think there are a lot of students who have received a valuable education, just like they do at many other institutions. The question is which students among them suffered financial harm.

Ms DeVos said her education department had inherited 65,000 claims from the Obama administration and nearly 300,000 were still awaiting adjudication. She said she was frustrated with the backlog, which she blamed on litigation. The Obama administration, she added, “encouraged the filing of applications when it knew it lacked the capacity to follow through” and had no process to approve them.

That was wrong, the Democrats replied. A report 2017 of the department’s inspector general described the agency’s process for evaluating applications — the Obama administration has approved about 32,000 — but staffing reduced to zero after Ms. DeVos took office. A federal judge ordered the department to stop using the Social Security Administration to adjudicate claims, they said, but that hasn’t stopped the department from processing approved claims or issuing denials.

Although the Office of Inspector General noted shortcomings in the Obama administration’s process, it said it was “pleased to note that the OIG did not identify any errors in the adjudicated claims and that the review of each of the sampled claims has been properly documented”.

Republican members came to Ms DeVos’ defense, echoing that she had “inherited a mess” and was protecting taxpayers.

Ms DeVos could not provide data on how many claims she believed to be invalid, but told the committee that “your jaw would drop” at some of the complaints. She cited the example of a borrower who filed a claim because “he didn’t like his teacher.”

Representative Virginia Foxx of North Carolina, the committee’s top Republican, pointed out that in two decades only a few dozen claims had been filed under the borrower’s defense rule, until 2015, when Corinthian collapsed.

“So obviously something happened,” she said. “Yes, those schools have closed, but there has been a culture shift, I believe in our country, in terms of what people believe they are owed.”

Rep. Greg Murphy, Republican of North Carolina, agreed. “I think the federal government has caused some of the problems we have in higher education right now because the money is so free.”

Stacy Cowley contributed reporting from New York.

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