California Sues DeVos Over Failures of Student-Loan Forgiveness Program

Education Secretary Betsy DeVos. (AP Photo/Pablo Martinez Monsivais)

(CN) — Accusing the Trump administration of being stingy with student loan relief meant for teachers, police officers and other public servants, California sued the U.S. Department of Education and Secretary Betsy DeVos on Wednesday for botching a bipartisan federal debt relief program.

California Attorney General Xavier Becerra says DeVos ignored instructions from Congress to expand loan forgiveness and instead “erected numerous obstacles” to public servant applicants. According to the federal complaint, the denial rate for the program meant to encourage college graduates to enter public service is approximately 94%.

“Today’s lawsuit reminds Secretary DeVos that she is not above the law,” Becerra said in a statement. “She is accountable to these college graduates who followed the rules and deserve better, especially amidst an economic crisis of historic proportions.”

Congress passed the so-called Public Service Loan Forgiveness program in 2007 to convince college students to consider working in municipal capacities. Students were promised the balance of their federal loans would be eliminated if they could make 10 years of on-time payments while employed in public service, among other requirements.

Yet once graduates started applying for the relief in 2017, the department denied applicants at a 99% clip. The failing program prompted Congress in 2018 to demand DeVos and her department to creating clearer rules to boost acceptance rates. The legislation included $2.3 million specifically to improve outreach and enroll more borrowers.

In the complaint filed in the Northern District of California, Becerra says the Trump administration has nonetheless continued to use a “convoluted” application process and is denying the vast majority of applicants even as huge numbers of teachers and nurses are struggling through the Covid-19 pandemic.

“The [department] has erected numerous obstacles to forgiveness, created borrower confusion and issued virtually categorical denials — only about 1% of applicants can access [the program],” the complaint states. “This compromises teachers, police officers, nurses, EMTs, and other public servants’ ability to support themselves and their families.”

DeVos and the department did not immediately respond to a media request regarding the lawsuit.

California previously sued the department in March for repealing the 2014 “gainful employment rule” one of over 80 lawsuits the state has filed against the Trump administration. Earlier this month, a group of California community colleges sued the department and accused it of denying schools pandemic relief from $1.8 trillion Covid-19 relief package known as the CARES Act.

Under the plan at issue in Wednesday’s lawsuit, borrowers employed in the military, law enforcement, public interest law, public education and health care are supposed to be eligible for loan forgiveness. But according to Becerra, as of March the department had awarded just 8% of the $700 million Congress intended for student loan debt relief.

Becerra claims the defendants’ loan servicers “misled borrowers” about which repayment plans were eligible, and as a result some borrowers have spent years making payments that don’t qualify for forgiveness. Adding to borrowers’ confusion, the complaint accuses the department of “steering” people toward repayment plans and providing bad advice.

“The department’s failure to communicate clearly with borrowers about program requirements and appropriately supervise its loan services is a primary cause of this disaster,” states the 33-page complaint.

California’s lawsuit echoes the concerns of U.S. senators who sent DeVos a letter in 2018 complaining about the management of the student debt relief program.

“We are deeply concerned by unnecessary hurdles that have been put in place for borrowers. Many of our constituents have expressed frustration and confusion with the department’s unnecessarily restrictive approach to determining borrowers’ eligibility for [the program],” wrote Senators Tim Kaine,D-Va., Sheldon Whitehouse,D-R.I., Tammy Duckworth,D-Ill., and Maggie Hassan D-N.H. 

California claims the department’s failures have dampened the state’s recruitment efforts by having the effect of “pricing” employees out of public service. It accuses the Trump administration of violating the Administrative Procedure Act and delaying a congressionally mandated program.

“College graduates who put in a decade of hard work and made timely payments on their student loans earned their [federal] loan forgiveness. But Education Secretary Betsy DeVos chose to ignore all of that,” said Becerra.

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