Predatory Lending/Consumer Protection Clinic

ITT Students’ $1.5 Billion Bankruptcy Settlement Approved by Judge

On Wednesday, November 28, the judge in the ITT bankruptcy case gave final approval to the settlement between the student class and the estate of ITT. The settlement is a big victory for former ITT students who were defrauded by the school and provides important relief. The court’s final order approving the settlement will become effective in approximately ninety days, during which time state Attorneys General and the U.S. Attorney General may file objections.

Key Components of the Settlement:

– The student class gets an approved $1.5 billion claim in the bankruptcy. In exchange, former ITT students give up their claims against the estate of ITT, and keep their rights to seek further relief from the Department of Education and private lenders;
– Over $500 million in student debt held by ITT is canceled; and
– ITT’s estate has returned the $3 million that students paid directly to ITT after it declared bankruptcy.

As part of the settlement, the parties got an official ruling from the IRS, saying that the estate is not required to treat the more than $500 million of cancelled debt as taxable.

This landmark settlement has provided more relief to defrauded student borrowers than the Department of Education has in the last two administrations combined.

In fact, the Department of Education has taken every possible to step to thwart relief for students. The Department has only approved 33 borrower defense applications for ITT students, while approximately 14,000 outstanding borrower defense applications sit unadjudicated.

To make matters worse, late last month, Betsy DeVos, Secretary of Education, reinstated the Accrediting Council for Independent Colleges and Schools (ACICS), ITT’s long-time accreditor. In 2016, the Department of Education had cut off ACICS’s ability to accredit schools because it failed to comply with federal criteria designed to make sure that schools like ITT followed federal and state laws and provided an education to students that was worthy of federal student loans. Year after year, ACICS enabled ITT to perpetrate its fraud on students, giving the company access to billions of dollars in federal student loan revenue. Now, ACICS has been given the green light from the Department to continue accrediting schools despite its role in defrauding hundreds of thousands of ITT students.

Meanwhile, this past June, the Securities and Exchange Commission gave former ITT executives Kevin Modany and Daniel Fitzpatrick a sweetheart deal on its charges that Modany and Fitzpatrick cheated the company’s shareholders and operating the company for their own personal financial benefit. On the eve of trial, Modany and Fitzpatrick walked away with a slap on the wrist.

Multiple agencies of the federal government have been loud and clear about where defrauded ITT students stand. But students will be louder. This settlement is an important step in acknowledging students’ experiences and the harms they have suffered at the hands of ITT and ACICS. All ITT-related fraudulent debts, including the federal and private loans that are not covered by this settlement, must be canceled, and we will continue to fight on behalf of students until that happens.

Click here to see the Washington Post’s recent story about the settlement.

Visit our website for additional information for former ITT students and to sign up for email updates about the student class claim in the bankruptcy case.

My Future Was Stolen By A Corporation: An ITT Student Story

The author, Lorenzo Boyland, is a former student of the for-profit ITT Technical Institute campus in Cordova, TN and resides in Mississippi.

My future was stolen by a corporation. Now, I’m left waiting for justice.

There are thousands who could tell a similar story. This is mine.

When I graduated high school, I joined the military and served my country. I served a four-year tour, and then re-upped for four more years, finishing in Iraq.

When I returned home, it was time to find a job. I graduated from  high school near the top of my class. I was an honorably discharged veteran. But I knew I needed a college degree.

One of my best friends told me about ITT’s campus in Cordova, Tennessee, which was conveniently located close to my home. When I sat down with ITT’s recruitment person, it seemed like a perfect fit.

I wanted to pursue a career in computer science. The recruiter promised that if I graduated from ITT, I was guaranteed a job. They promised that if I maintained a 3.4 grade point average, I would receive a discount on my tuition. I made the school aware that I was a military veteran and that my G.I. Bill would help to cover the cost of tuition. They told me not to worry about taking out additional loans, because ITT would put me on track for a well-paying career.

I was excited about beginning my higher education, which ITT sold me as the beginning of the next stage of my life. Then I learned that ITT was all a fraud.

I cared about my education, and I worked hard for my degree. I graduated with that 3.4 and honors. ITT never delivered the promised tuition discount.

I went to the career placement office for help finding a job. They pointed me to the job board at the front of the room.  And they referred me to a retail job at Best Buy.

I thought – that’s what you’re recommending to me? I paid thousands of dollars to you and all you can recommend is Best Buy? I could have done that out of high school.

I went out to find a job on my own, but I did not have many connections. I was directly out of the military and had been away for eight years.  I learned very quickly that the ITT diploma was not worth anything to companies looking to hire, and employers frequently laughed at me when they learned I attended ITT. I studied and succeeded, but the computer science job I worked so hard for never materialized.

When I told ITT that I could not get a job in computer networking, they told me that it was because I only had an associate degree, and that I should enroll for a bachelor’s. ITT tried to prey on my inability to get a job due to their broken promises to convince me to further fund their scam. At that point I realized that I, like so many others, had been completely ripped off.

Since I could not get a job in computer networking, I began working as an overnight baker at Panera. That job allowed me to start making payments toward my $34,000 in federal loans from ITT.

Then I got a call that felt like a punch in the gut. It was Chase Bank asking about another $18,000 loan in my name. I had no earthly idea what they were talking about.

Turns out, ITT had signed me up for an additional private loan without my knowledge. And it was 1000 days past due! I was completely blindsided.

I am continuing to pay down my federal loan. But that private loan? I’ll probably get another call today asking me to pay. I don’t blame the people on the phone – they are just doing their job. But that loan is impossible to get caught up on.

My financial situation wears on me every day. I work hard to try to earn enough to live while paying off my loans. I should not have to pay a dime given the egregious lies ITT sold me.

I am not alone. ITT routinely lied to hundreds of thousands of other students. They targeted people who were eligible for federal loans and grants –including low-income people and veterans like me – and took advantage of our dreams and ambitions.

I work hard. I served my country. I went to college to build a better life. ITT profited off of my aspirations and left me nothing.  ITT’s actions were wrong and illegal. It perpetrated a fraud on hundreds of thousands of students. ITT put us all in a hole without a shovel to dig ourselves out.

ITT declared bankruptcy in September 2016, and even then, only stopped collecting money from students after students sued in the bankruptcy. This week, a judge has finally canceled some ITT debts based on that case.

However, like thousands of other former students, I am still paying federal student loans that funded a school that no longer exists.

We are still waiting for justice.

If you are a former student of ITT, click here to sign up for future updates.

New York Times Highlights Project on Predatory Student Lending Cases and Clients

A recent story in the New York Times highlighted several of the Project’s cases, and their prominence in the ongoing battle to force the Department of Education to recognize the legal rights of students who have been cheated by predatory for-profit colleges.

New York Times: Borrowers Face Hazy Path As Program To Forgive Student Loans Stalls Under Betsy DeVos

The article featured several of the Project on Predatory Student Lending’s major victories in court asserting student borrowers’ rights. These favorable rulings are a testament to our clients’ perseverance and willingness to stand up to the Department and drive change for student borrowers who attended for-profit colleges across the nation.

One such client, Meaghan Bauer, is profiled in the article. Meaghan was one of the plaintiffs we represented in Bauer v. DeVos. In winning that case, she thwarted the Department of Education’s attempts to prevent the implementation of the 2016 borrower defense rule. Because of this lawsuit, the rule prohibiting schools from taking federal money while forcing students to arbitrate their claims against schools took effect.

Photo of Meaghan Bauer. Credit: M. Scott Brauer for The New York Times

 

Meaghan talked to the Times about her experience the for-profit New England Institute of Art, and how the debt she incurred as a result of the school’s fraud has affected her life.

 

 “It’s just dream-crushing,” said Meaghan Bauer, who owes $45,000 for her time at the New England Institute of Art. The for-profit school, in Brookline, Mass., closed last year and was sued on fraud charges by the state attorney general in July.

“I can’t afford to go back to school,” Ms. Bauer, 27, said. “Will I ever be able to buy a house? Or get married? I spent so much time working on a useless degree, and it could ruin me financially for the rest of my life.”

 

Meaghan is just one of the many thousands who are waiting for the Department to rule on their borrower defense applications. Right now, “more than 100,000 claims for relief are in limbo, according to the Education Department’s most recent data” according to the Times.

And even when the Department has reviewed claims, it used illegal methods to justify giving students “partial relief.” In another of our cases, Calvillo Manriquez v. DeVos, Corinthian students challenged these partial denials and a judge ruled that the Department’s actions were illegal, and granted our injunction to stop these practices. As the Times references:

 

The department’s attempts to reduce the amount of forgiven debt and block a new forgiveness rule have drawn rebukes from federal judges.

A judge in California found that the department had illegally obtained data from the Social Security Administration on the earnings of former Corinthian Colleges students as it sought to offer some of them only partial loan relief. Last month, the judge granted class-action status to 110,000 former Corinthian students who have applied to have their loans forgiven and may have been granted partial relief.

 

Still, even after being rebuked again and again by federal judges, the Department has been incredibly, callously slow to act.

“This rule is only as good as the administration’s intent to implement it,” Toby Merrill, the Director of Harvard Law School’s Project on Predatory Student Lending, told the Times.

The Department tries to argue that this issue is complicated, but it is not.

If borrowers were cheated by their school, the government must cancel their loans upon request. It’s what borrower defense is all about. Our partners at The Debt Collective organized cheated Corinthian students in 2015 to demand the cancellation of Corinthian debts. And Eileen Connor, the Project’s Director of Litigation, worked with Debt Collective to develop the original borrower defense application, and was a negotiator for the committee that developed the 2016 borrower defense rule. She even proposed the arbitration provision, which got added to the 2016 rule and took effect when we won Meaghan’s case.

Hundreds of thousands of students have applied for borrower defense since 2015, but only a very small fraction of claims have been processed. This includes another one of our cases, ITT, where only 33 students have received cancellation with 13,000 applications outstanding.

Jason White, a former ITT student, has been waiting for three years. As he told the Times:

 

Mr. White, 41, of St. Louis, graduated in 2008 with a bachelor’s degree in software engineering. But when he landed a position as a web developer, he quickly discovered that he lacked the skills to do his job.

Instead of teaching students to program computers, Mr. White said, instructors had handed out sheets of code and simply had the students retype them. At one final exam, the instructor stood at the front of the classroom and read the answer key aloud, he said.

“My degree,” he said, “was a sham.”

To finance that degree, Mr. White took out loans totaling more than $80,000.

 

Seeking justice for borrowers has never been easy. The court victories we’ve achieved have made significant progress, but are just the beginning of the work that lies ahead.

It’s past time for the Department of Education to do the right thing and cancel the debts of students who were cheated by Corinthian, ITT, and other predatory schools.

We’ll keep fighting alongside these students, one victory at a time, until they do.

Click here to read the full New York Times article.

A Federal Judge Told Betsy DeVos to Stop Stealing Students’ Tax Refunds

The rights of more than 100,000 borrowers are affected by this court ruling.

For years, the Department of Education has acted more like a collection agency than an agency operated for the benefit of students. Using aggressive collection methods, the Department of Education routinely seizes the tax refunds and wages of thousands of students who are struggling to pay their student loans after being cheated by predatory for-profit colleges.

On October 25, a federal judge told the Department of Education to stop.

In the case of Williams v. DeVos, the court found that the government had unlawfully taken the tax refunds of two Corinthian College students to collect on their student loans, even though the Department had previously acknowledged Corinthian’s fraud and the Massachusetts Attorney General had applied to have the students’ loans cancelled.

There are more than 100,000 students with pending borrower defense applications who could be affected by the decision.

Not only did the court withdraw the Department’s authority to seize these borrowers’ tax refunds, it ruled that the Department of Education must consider the borrower defense application submitted by the Massachusetts Attorney General on behalf of all Massachusetts Corinthian students – an important acknowledgement of the power of Attorneys General to submit borrower defense claims on behalf of their constituents.

This ruling is especially critical for the many thousands of Massachusetts students who have been cheated by Corinthian, because many of them are not aware that they are eligible for borrower defense, or don’t know how to apply. The Department has callously exploited that fact, mercilessly collecting and coercing payments from students while fully aware that debts from Corinthian are invalid.

This government theft of tax refunds, especially when those tax refunds are really anti-poverty benefits like the earned income tax credit, is unconscionable. The Department of Education shouldn’t need a court ruling to understand that.

The Department of Education has the power and the obligation to do the right thing and immediately cancel the debt of all Corinthian borrowers, all of whom were cheated on the government’s watch.

Any former student who was cheated by their school can apply to discharge their federal student loan debt. This website has information about borrower defense, and a link to the Department of Education’s Universal Borrower Defense form.

A Winning Streak For Student Borrowers

Students Won Several Major Victories This Month Against the Department of Education.

After years of delay by the Department of Education, student borrowers represented by the Project on Predatory Student Lending are finally winning their rights in courts. On four separate occasions this month, judges rebuked the Department, struck down illegal policies, and ruled in favor of students.

These recent rulings and decisions demonstrate that student borrowers have, and can enforce, their rights against the Department of Education and predatory for-profit colleges. These wins are a testament to our clients’ perseverance and willingness to stand up to the Department and drive change for student borrowers who attended for-profit colleges across the nation.

In the past three weeks alone, student borrowers won the following cases:

The 2016 Borrower Defense Rule is Now in Effect.

Students thwarted the Department of Education and the for-profit college industry’s attempts to prevent the implementation of the 2016 borrower defense rule. This rule includes a set of important protections for student loan borrowers from predatory schools, including their right to bring their claims in courts instead of in arbitration if their school participates in the federal student loan program. The Department finally backed down from its stubborn delays after all of its arguments were rejected by the court. The judge also rejected an industry attempt to stop the 2016 borrower defense rules from taking effect. As a result, the rule took effect on October 16, 2018 after more than a year of illegal delays.

These victories are a rebuke to both the Department of Education and the for-profit college industry. Students did not stop fighting to get this rule implemented, and now, because of their willingness to fight, these important and long-delayed rules are in effect.

Read more about the borrower defense rulings and the cases Bauer v. DeVos and CAPPS v. DeVos.

The Department Cannot Seize Tax Refunds from Borrower Defense Applicants.

On October 25, 2018, a federal judge ruled that the Department of Education had illegally taken the tax refunds of two former Corinthian College students to pay their student loans, without addressing the assertion, made in borrower defense applications, that their loans are fraudulent and unenforceable. As a result of this ruling, all student loan borrowers are protected from having their income tax credit seized to pay their federal student loans while their borrower defense applications are pending. This win is one step toward stopping the Department’s long-standing and utter disregard for the rights of students who have been subjected to the harmful practices of the predatory for-profit college industry.

Read more about the victory in Williams v. DeVos.

Corinthian Colleges Students Win Class Certification, and Elected Officials Call on the Department to Cancel All Corinthian Debt.

On October 15, a judge certified a class of Corinthian Colleges borrowers, allowing these students to team up to fight for the full loan cancellation they legally are owed. The Project on Predatory Student Lending and Housing and Economic Rights Advocates (HERA) represent the students in the class action lawsuit Calvillo Manriquez v. DeVos.

That same day, a group of elected officials and organizations from across the country called on the Department of Education to cancel the debts of all Corinthian College students once and for all.

Read more about the #CancelCorinthian campaign.

The Economic Case For Cancelling All Student Debt

Experts highlight data showing that cancelling all student debt would provide a massive boost to the economy, lasting decades

As the national student debt rises year after year, millions of Americans are overwhelmed with seemingly never-ending debt. What if there was an easy solution? What would happen if all student debt was cancelled?

That’s what a group of economists and researchers set out to examine. And their data shows that not only can you cancel all student debt, doing so would bring significant, long-lasting economic benefits. At a forum last week at Harvard Law School, hosted by the Project on Predatory Student Lending and Freedom to Prosper, the experts shared their research.

Steven Swig, co-founder of Freedom to Prosper, Stephanie Kelton an economist and one of the authors of the recent Levy Institute study The Macroeconomic Effects of Student Debt Cancellation, Julie Margetta Morgan, Executive Director of Great Democracy Initiative, and Toby Merrill, Director of the Project on Predatory Student Lending, gathered to discuss the concept.

Right now, over 44 million Americans have a combined $1.4 trillion in student debt. It is a massive cloud that hangs over the lives and financial futures of countless Americans.

“Student debt has now become the largest unsecure debt in the country,” said Steven Swig. “I call it reverse estate planning – we are sucking back wealth from future generations.”

There are lots of reasons for this. New, emerging industries have not trained workers for their jobs, and employers are increasingly demanding workers with advanced degrees. That has led to an increase in the number of students enrolling in colleges and other higher education institutions. This has coincided with an acceleration in the price of obtaining those degrees. In just 25 years, the cost of tuition and fees as a share of median household income has nearly doubled, from 18% in 1990 to 35% in 2014.

“If you actually look at trends in earnings, those with college degree have stayed stagnant or fallen, and those with just a high school diploma have fallen. Add rising student debt and you get a sense of why people are so frustrated,” explained Julie Margetta Morgan.

In short, more people are seeking higher degrees to advance their chances in the job market and going further into debt to do it.

At the Project on Predatory Student Lending, we have seen the exploitation of this situation by one particularly insidious industry – for-profit colleges.  The predatory for-profit college industry is the worst of the worst, preying on people who are low-income, veterans, single mothers, or people of color – with lies about quality training and job placements after graduation.

“The worst student debt targets the people who are least able to handle it,” said Toby Merrill, Director of the Project on Predatory Student Lending.

State attorneys general already have brought numerous cases showing that many of these colleges have committed massive and pervasive fraud against students. And the Department of Education has the legal authority to cancel fraudulent student loans. Yet, every administration has resisted doing so.

This resistance to reason is even less explicable in light of the broader economic argument that can be made for all cancelling student debt.

The Levy Economics Institute of Bard College conducted extensive research into what would happen to our entire economy if the government cancelled all student loans. The findings were presented in a report and at the forum on Wednesday, and the results are remarkable.

Each simulation run by the Institute saw a dramatic rise in almost every national economic indicator:

  • The Gross National Product rose from between $861 billion to one trillion dollars over 10 years.
  • GDP increased, on average, between $86 – 108 billion per year.
  • Unemployment went down and job creation went up – adding about 1.5 million jobs per year.
  • State budgets increased by about $10 billion every year for ten years.

Those are just the macroeconomic effects.

The study also showed that cancelling student debt freed up young entrepreneurs to act on their business ideas, resulting in more small business creation. It resulted in higher credit scores, offering people better opportunities to purchase homes or make other life purchases. It even helped more people attain college degrees by reducing college drop out rates.

“The economic consequences of student debt cancellation are an unequivocal net positive for the economy as a whole,” said Stephanie Kelton. “Credit scores increase, small business loans increase, and there’s a reduced vulnerability to economic shock.”

In short, the simple act of cancelling student loans resulted in a cycle of individual growth and national success, each steadily building on each other.

The Department of Education has resisted debt cancellation, claiming that the administration has an obligation to all taxpayers, not just the students. This is clearly a misinformed response. As this report outlines so clearly cancelling student debts benefits both students and taxpayers.

How It Feels When Students Stand Up to the Department of Education and Win

Meaghan Bauer knew something was wrong, so she stood up and fought back. As a result, she’s helping protect thousands of other students’ rights to borrower defense.

Meaghan Bauer and Stephen Del Rose, former students of EDMC-owned New England Institute of Art, were cheated by their school and left with a massive pile of debt.

Like the hundreds of thousands of students who were cheated by predatory for-profit colleges, they trusted in institutions like their school and their government. Their school not only let them down, but actively misled, cheated and harmed them. Then, the Department of Education doubled down on that harm. Under Betsy DeVos, the Department repeatedly delayed the implementation of a new Borrower Defense rule, which offered critical protections for students and would have allowed them to bring their case against their school to court on behalf of a class.

Meaghan and Stephen fought back. They filed a lawsuit against the Secretary of Education for illegally delaying a rule intended to protect borrowers’ rights. And this month, a federal judge agreed – ruling that the Department of Education broke the law when it delayed the rule.

When she learned of the ruling, Meaghan Bauer was elated. But despite her happiness about winning a major victory for students, Meaghan was still angry. She said:

“We are supposed to be able to trust our government and know that when they make a new policy it is with our best interests in mind. It is really sad that the government dragged this out for so long and acted so childishly that they needed a judge to tell them that what they are doing is illegal. I hope this ruling reminds the government of its obligation to care for its citizens who are the future of this country, instead of focusing on lining the pockets of for profit institutions. They should admit they were wrong and take the necessary actions to remedy their policies and reestablish some of the faith in our government that has been lost.”

Meaghan and Stephen are represented by the Project on Predatory Student Lending and Public Citizen. Click here to read more about their case.

Judge Rules for Project’s Clients; Strikes Down Department of Education Illegal Delay of 2016 Borrower Defense Rule

In another major rebuke to DeVos, the Project wins Bauer v. DeVos case

Judge rules that the Department of Education’s delays in implementing 2016 borrower defense rule were illegal and caused serious harm to borrowers

In a victory for student borrowers, and another massive rebuke to Betsy DeVos, a court this week ruled that the Department of Education’s delays in implementing the 2016 borrower defense rule were illegal. The ruling also rejects the Department’s attempts to do whatever it wants with impunity.

This is an incredibly important win for student borrowers, and really anyone who cares about having a government that operates under the rule of law, rather than as a pawn of the for-profit college industry.

The case, Bauer v. DeVos, was brought by the Project on Predatory Student Lending and Public Citizen in 2017 on behalf of two former students of the New England Institute of Art, which was owned by Education Management Corporation (EDMC).

The ruling establishes that all three of the actions the Department took to thwart the 2016 borrower defense rule were illegal, and that the Department failed to weigh the harm that its delay imposed on student borrowers. The court also found that Department offered a plainly inadequate justification for changing its mind just months after it concluded, in 2016, that the use of forced arbitration by schools was a risk to the integrity of the federal student loan program and unfair to borrowers.

The 2016 borrower defense rule offers far more protection to borrowers, federal student aid programs and taxpayers than the Department’s recent proposal, in ways including:

  • It prevents schools from forcing students to give up their right to go to court;
  • It uses the preponderance of the evidence standard;
  • It offers a fair process for student borrowers to assert school misconduct in defense of their loan obligations, without requiring them to default on their loan obligations first, and allows for an efficient group-based process; and
  • It protects taxpayers by requiring risky schools to post letters of credit as insurance against borrower claims.

This ruling exposes even more flaws in the Department’s recent proposed rulemaking on borrower defense.

The Court explains in many different ways that the Department is entitled to change its conclusions, but it cannot do so without acknowledging its prior conclusions and offering an explanation for its fundamental change in course. And as we documented, the 2018 proposed rule contains serious misrepresentations and fundamental lies.

Today, the judge held a hearing today to consider next steps, including whether the 2016 borrower defense rule should take effect right away. The judge has taken the question under advisement and will issue a further ruling in the coming weeks. We were encouraged that the judge focused on the harm that these significant delays have caused student borrowers, and continue to be outraged that the Department continues to ignore this harm.

The judge also set a very speedy briefing schedule for CAPPS, an industry group of for-profit schools in California, to renew its efforts to get rid of the 2016 rule. CAPPS’s first brief is due on September 24, and the Department, the students, and states have two weeks to respond. In handling this part of the case, the Department will—finally—have to say why it thinks the 2016 rule should not take effect.

We will continue to fight alongside students who are standing up to the Department’s unfair and illegal attempts to delay and eliminate their rights in order to protect a predatory industry.

The ruling has been covered extensively the media, including in the New York Times, Associated Press, MarketWatch, and NPR.

Click here to read more about this and other Project cases.

Comments on Borrower Defense Call Out Betsy DeVos’ Lies

Public comments from leaders across the country cite the Project’s revelation that the proposed borrower defense rule is based on fundamental lies

The public comment period for the Department of Education’s proposed new Borrower Defense rule came to a close this week, ending the thirty-day window in which the public had the opportunity to weigh in on the new proposed rules.

But what happens when the government proposes a rule that is based on fundamental lies and misleads the public? The comment period becomes meaningless. That is exactly what has happened this month with the Department of Education’s proposed changes to the Borrower Defense rule, and it is why dozens of elected leaders have called for it to be withdrawn, citing the Project on Predatory Student Lending’s initial comment.

As soon as the comment period opened, the Project submitted an initial comment showing that the Department was lying about how it has historically interpreted the Borrower Defense rule, and that this lie infects the Department’s estimates of how much the rule will cost. We attached the Department’s own documents proving our point. Following this revelation, others began speaking out and citing these inaccuracies as a reason that this disaster of a proposal should be rescinded immediately.

California Attorney General Xavier Becerra was one of the first to speak out. In his letter to the Department of Education, he cited the Project’s comment and said:

 “Secretary Betsy DeVos has proven yet again that she’s out of touch with the long-standing practice of allowing borrowers to submit claims when they suspect fraud. I urge the Department of Education to withdraw its proposed rule immediately. If the Department proceeds with this flawed, harmful and erroneously justified regulation, it should extend the comment period to a minimum of 60 days to allow for the submission of detailed comments from the public.”

Massachusetts Representative Joseph Kennedy III called on the Department to withdraw the rule, citing in his letter its egregious harm to students and the misinformation revealed by the Project.

“The proposed rule contains significant misrepresentations and incorporates those misrepresentations into its calculation of the cost of the rule, preventing the public from understanding and commenting on an accurate explanation. The Department erroneously asserts that it will return to the Department’s original practice of only accepting claims from borrowers facing coercive collection practices that it says “persisted for 20 years.” This is entirely inaccurate. Borrowers have been able to present claims outside of collections for the entire tenure of the rule proceeding prior to 2015. Stating that the Department only processed defensive claims prior to 2015 is not only false, it is misleading to the public. The Department’s own documents, as submitted by the Project on Predatory Student Lending, reflect the historical practice of the Department accepting claims outside of coercive collection proceedings. Because of these flaws, the proposed rule should be withdrawn and corrected immediately.”

Massachusetts Senator Elizabeth Warren called the proposed rule a “gross betrayal of the Department’s mission to serve students” in her letter to Betsy DeVos, which also cited the Project’s comment findings that the rule is based on fundamental lies.

“The Department’s willingness to mislead the public in this NPRM is appalling. And, the Department’s reliance on inaccurate information in order to restrict and virtually eliminate debt relief for defrauded borrowers is a gross betrayal of the Department’s mission to serve students.”

45 Senate Democrats, including Senator Warren, also submitted a letter highlighting these falsehoods, and the multitude of other reasons why this rule harms students and helps predatory for-profit schools.

“Not only is this proposal poor public policy, but it also breaks from previous practices adopted by both Democratic and Republican administrations. The Department has inaccurately asserted that “affirmative” claims were not permitted until the Obama Administration reinterpreted the 1995 borrower defense regulations. Yet, as the Legal Services Center of Harvard Law School makes clear, the Department accepted “affirmative” borrower defense claims well before 2015, including numerous cases between 1998 and 2003. The Department’s reliance on inaccurate information makes clear its motives are political, rather than the best interests of students.”

Massachusetts Attorney General Maura Healey joined AG Becerra and 18 other Attorneys General in submitting a comment, calling the rule “a license to cheat students and taxpayers.”

“The proposed regulations accordingly would be disastrous for students and taxpayers, and a windfall for the exclusive benefit of law-breaking schools. We urge the Department to rescind this misguided proposed rulemaking.”

House Committee on Education and Workforce Democrats submitted their own joint letter, expressing their strong opposition to the Department’s proposed rule.

“Throughout the NPRM, the Department wrongly declares that prior to the 2016 final borrower defense rule, the agency only accepted claims from borrowers who were in post-default collection proceedings (i.e., defensive claims). As seen in the evidence submitted by the Legal Services Center of Harvard Law School on August 2, 2018, the Department has been accepting claims from borrowers who were in good standing on their loans dating back to 1998. 2 This mischaracterization of history should be enough to consider withdrawing this proposed rule.”

Click here to learn more about the proposed Borrower Defense rule.

Resignation of Seth Frotman Reinforces The Trump Administration’s Failure To Protect Student Borrowers And Taxpayers

Today, Seth Frotman, the student loan ombudsman at the Consumer Financial Protection Bureau, announced his resignation in a letter stating that the bureau has “abandoned the very consumers it is tasked by Congress with protecting.”

The Consumer Financial Protection Bureau can play an important role in protecting student borrowers, having helped hold predatory schools like ITT and Corinthian Colleges accountable for their illegal business practices. Current CFPB leadership is thwarting any and all efforts to enforce student and consumer protection, and obstructing the work of those, like Seth, who would protect students. Seth’s resignation reflects this administration’s alignment with for-profit colleges and predatory corporations rather than the students and taxpayers it is supposed to protect.

The Project on Predatory Student Lending is the leading legal advocate for students cheated by for-profit colleges, representing hundreds of thousands of students in class action lawsuits, including ITT and Corinthian Colleges.

Several advocates and elected officials also voiced concerns about the the Bureau’s unwillingness to fulfill its obligation to students and taxpayers.