Borrower Groups Sue Biden Administration Over Stalled Student Loan Forgiveness Applications

Finance

A group of student loan borrower advocacy organizations filed a lawsuit on Thursday against the Biden administration, accusing officials of delaying the processing of a group application for student loan forgiveness for borrowers who were defrauded by their school. Many borrowers have been waiting years for relief.

“While the Department has delayed responding… borrowers have struggled under the burden of these loans, in some cases being forced to choose between paying their student loan bill and paying for other necessities like food and rent,” said Kyra Taylor, staff attorney at the National Consumer Law Center, one of the organizations involved in the suit. “The Department of Education must act quickly when it becomes clear that a school has harmed students. It should not leave students in limbo, repaying debts that should be canceled.”

Student Loan Forgiveness For Borrowers Defrauded By Their School

The student loan forgiveness program at issue in the new lawsuit is the Borrower Defense to Repayment program. Borrower Defense can cancel the federal student loan debt for borrowers who were defrauded by their school (often, predatory for-profit schools) through misrepresentations and other illegal conduct related to core elements of a degree or certificate program such as admissions criteria, the acceptance and transferability of credits at other educational institutions, and career prospects.

The Borrower Defense program has been mired in political and legal battles for years. Regulations governing the new program were first established by the Obama administration in 2016. But under the Trump administration, the Education Department subsequently rewrote the Borrower Defense rules and increased the burden of proof required for a student to prevail on a claim. The Department also whittled down the available relief available to borrowers by imposing a partial relief policy, allowing (in some cases, at least) minimal student loan forgiveness even for approved claims.

The Biden administration has since rescinded the Trump-era partial relief policy, and has been working through a massive backlog of tens of thousands of unprocessed Borrower Defense applications. The administration is also working on yet another overhaul of Borrower Defense regulations. The administration has also touted nearly $2 billion in student loan forgiveness approved for 105,000 borrowers under the Borrower Defense program.

But still, many student loan borrowers have been waiting years for relief after submitting Borrower Defense applications. And many still don’t know where they stand.

Student Loan Borrowers Who Attended Predatory School Still Have Not Had Their Loans Cancelled

The lawsuit filed this week concerns graduates of Westwood College, a for-profit school which shut down in 2015 following allegations of “substantial misrepresentations about graduates’ likely employment prospects” and the transferability of credits, according to the Department of Education.

The Illinois Attorney General’s office filed a group Borrower Defense to Repayment discharge request with the Department of Education on behalf of defrauded students in Illinois who attended Westwood College’s criminal justice program. But student loan borrower advocacy groups allege that the Department of Education never acted on the group application, leaving hundreds or potentially thousands of student borrowers burdened by debt from a useless degree.

Earlier in May, Illinois Attorney General Kwame Raoul sent a letter to the Biden administration urging the Education Department to grant the Westwood group Borrower Defense application. “There is no more analysis or evidence needed: Westwood defrauded all students who attended its Illinois criminal justice program,” Illinois AG Raoul wrote. “The Department – and only the Department – knows which defrauded borrowers continue to carry federal loan debt for their time at Westwood. These consumers continue to be harmed by the student loan debt they carry and its negative impact on their lives.”

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The coalition of organizations that filed the suit argue that a disproportionate number of these borrowers are students of color. “From 2004 until 2015, Westwood’s student population was approximately 44% Black and 21% Latinx, nearly triple and one and a half times the statewide average enrollment among these groups respectively,” said the coalition in a statement.

“The Department of Education’s failure to act disproportionately – and unjustifiably – abandons low-income Black and Latinx borrowers who are particularly burdened by unaffordable and unfair debt after generations of discriminatory and government-sanctioned policies that strip wealth from communities of color,” said Genevieve Bonadies Torres, associate director of the Educational Opportunities Project with the Lawyers’ Committee for Civil Rights Under Law. “By neglecting its legal obligations to defrauded students who are entitled to relief, the Department’s inaction exacerbates existing racial disparities in educational outcomes and economic opportunity.”

The lawsuit, Hemphill v. Cardona, was filed in U.S. District Court for the District of Columbia. It seeks declaratory and injunctive relief and a determination that “all borrowers identified in the Westwood Group Application are entitled to full loan discharges” under the Borrower Defense to Repayment program.

The group of student loan borrowers is represented by Student Defense, the Lawyers’ Committee for Civil Rights Under Law (Lawyers’ Committee), and the National Consumer Law Center.

Further Student Loan Reading

If Biden Enacts Broad Student Loan Forgiveness, It May Look Like This

40,000 Student Loan Borrowers Will Get ‘Immediate Debt Cancellation’ Automatically — But Questions Remain

Want Student Loan Forgiveness? To Qualify, Borrowers May Need To Do This First

Who Qualifies For Student Loan Forgiveness Under Biden’s Huge New Expansion Of Income Based Repayment

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