After months of delay, DeVos touts limited student loan forgiveness plan

House Democrats press Trump's education chief over relief for defrauded students

Education Secretary Betsy DeVos in the Capitol in July, 2019. (Tom Williams/CQ Roll Call file photo)
Education Secretary Betsy DeVos in the Capitol in July, 2019. (Tom Williams/CQ Roll Call file photo)
Posted December 12, 2019 at 11:46am

Education Secretary Betsy DeVos sought to defend her department’s 18-month delay in processing rising numbers of student loan forgiveness claims, saying at a Thursday hearing that officials lacked a proper process to review them.

Roughly 240,000 claims remain outstanding as DeVos has sought to change the department’s process to allow students who have been defrauded by colleges to have their federal student loans canceled.

The Education Department has not processed any claims since June 2018, though it is expected to begin processing again this week, after DeVos announced changes to how students will qualify for some loan forgiveness.

“There were tens of thousands of claims, and there was no process and no structure for considering them,” DeVos told the House Education and Labor Committee at her first appearance before the panel since April.

It also came in the wake of an October court ruling against the department for continuing to collect on loans from students defrauded by Corinthian Colleges.

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She repeated her past arguments for the delay in processing claims, pointing to the Obama administration, which finalized changes to the rule in 2016 after an influx of claims against Corinthian. That left the Education Department without an effective system to process the claims, including some 64,000 left over from the Obama administration, she said.

She also referenced a May 2018 court decision that struck down her proposed change to the formula for processing claims, saying it prevented the department from moving forward.

Committee Democrats pushed back, noting that the judge’s ruling explicitly allowed the department to continue processing claims.

“That’s not because the judge handcuffed you in terms of providing full relief,” Rep. Joe Courtney, D-Conn., said. “Her order specifically says that she left that door open for you. It was really your decision.”

But DeVos said that without a “proper methodology” like the one she had proposed, “we couldn’t continue to process” claims.

“I understand that some of you here want to have blanket forgiveness for anyone who raises their hand and files a claim, but that’s simply not right,” she said.

The hearing came days after the department announced the new formula that will determine how much relief students are owed. The formula, which takes effect in July 2020 and doesn’t apply to current claims, will compare a student’s earnings to the median earnings of a graduate who attended a comparable school.

The wider the gap, the more loan forgiveness the student qualifies for. The new process assumes students may have gotten some value from their degrees.

Limited relief? 

Democrats on the committee criticized the formula for providing many applicants only partial loan relief, leaving students who were defrauded with remaining debt.

“In sum, defrauded borrowers have been cheated twice, first by their college, and then by a Department of Education that refuses to make them whole,” Chairman Robert C. Scott, D-Va., said.

They also took issue with the way that students’ earnings are measured in the formula. It’s a “program to program review,” DeVos said, meaning an applicant’s personal earnings won’t be considered — instead the department will use the median earnings from students who attended their program at their school.

“That’s not an individualized review,” said Rep. Donna E. Shalala, D-Fla. 

DeVos has been skeptical of the Obama administration’s debt forgiveness rule during her tenure at the department, questioning whether all applicants qualify for full aid. 

Her original changes to the formula, announced in 2017 and stopped by the 2018 court decision, similarly linked the amount of loan forgiveness to students’ salaries. A federal judge ruled that the department’s use of Social Security Administration data violated students’ privacy rights.

The formula announced this week tries to avoid that problem by using publicly available salary data.

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Democrats on the committee raised internal Education Department documents that show that DeVos overruled department officials who argued early in 2017 for awarding students who attended Corinthian Colleges and ITT Technical Institute full relief. NPR first reported on the documents this week.

DeVos said she was not familiar with the documents in question.

“There are hundreds of lawyers in the Department of Education, many of whom generate many ideas and recommendations,” DeVos said. “I take the recommendations, I take the input. Ultimately, I need to make sure that I am following the law and following policies and practices that are consistent with the law.”

Republicans on the committee praised the new formula and supported DeVos in her handling of claims so far. “Claims that Secretary DeVos is unnecessarily or purposely delaying relief for these borrowers is false,” ranking member Rep. Virginia Foxx, R-N.C., said.

A federal judge in October held DeVos in contempt of court for continuing to collect on loans from students defrauded by Corinthian Colleges. The court fined the department $100,000 in October, and the department said students would be repaid. DeVos said she doesn’t know if the fine has been paid yet. 

“Human beings made mistakes,” she said. “As soon as we became aware of it, we said we’ll acknowledge it, and we’ll correct the issues. And we did immediately.”

DeVos was the sole witness in the hearing Thursday but sat before the committee with Mark Brown, who leads the Federal Student Aid office and was allowed to help her answer questions.

The committee battled with the Education Department this fall for documentation on borrower defense implementation and DeVos’ testimony. The department had pushed for members to hear from Brown instead, but ultimately DeVos agreed to testify.  

Brown said that claims are ready to be processed, and his team has tripled to deal with them. “We expect to clear the majority of this backlog, minus any litigation, over the next 12 months,” he said.

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