DeVos Launches Latest Bid to Revamp Student Loan Forgiveness Plan

(CN) – U.S. Education Secretary Betsy DeVos took another crack at revamping a student loan forgiveness program Tuesday, affecting thousands of students who took out federal loans to attend for-profit colleges that solicited attendance with fraudulent claims.

Education Secretary Betsy DeVos speaks during a student town hall at the National Constitution Center in Philadelphia on Sept. 17, 2018. (AP Photo/Matt Rourke, File)

DeVos has been striving to undo the loan forgiveness program enacted by Obama-era Education Secretary Arne Duncan which set out to eliminate debt for about 32,000 students duped into paying for classes at Corinthian Colleges. The for-profit institution eventually declared bankruptcy amid allegations of fraud.

One of the few cabinet secretaries with President Donald Trump since the beginning of his administration, Devos said the Obama-era forgiveness program was a massive giveaway of taxpayer funds and strove to make over the “borrower defense to repayment” to give students partial relief from their debts.

“We cannot tolerate fraud in higher education, nor can we tolerate furiously giving away taxpayer money to those who have submitted a false claim or aren’t eligible for relief,” DeVos said in a statement.  “This new methodology treats students fairly and ensures that taxpayers who did not go to college or who faithfully paid off their student loans do not shoulder student loan costs for those who didn’t suffer harm.”

The new methodology offers a sliding scale of debt relief based on a complex formula that measures the median salary of graduates from the fraudulent for-profit colleges and compares them against median salaries of graduates from similar schools. If the graduates’ earnings are at a deficit they will be entitled to relief.

Eileen Conner of Harvard Law School’s Legal Services Center castigated DeVos’s new plan in a statement released Tuesday.

“Anything less than full loan cancellation for students cheated by for-profit colleges is invalid,” Conner said. “Under law, cheated students have the right to have their loans fully canceled. This partial denial scheme will force thousands of families to pay fraudulent debts that never should have existed in the first place.”

This is the second time DeVos has attempted to undo the Obama-era forgiveness program and install a program that provides partial relief. After the first plan was installed and lawsuits ensued, U.S. Magistrate Judge Sallie Kim deemed DeVos’ plan illegal as it relied on salary data taken from a separate federal agency.

Kim said DeVos broke the law by providing the Social Security Administration with private details about students in order to ascertain their income levels. Kim also held DeVos in contempt of court for proceeding with billing about 45,000 students for loans associated with Corinthian Colleges while the case is still pending.

DeVos garnished wages and took tax refunds despite the court order. And her latest plan will almost certainly face new legal challenges.

Conner and other student advocates complain the current process leaves students in limbo, as debt claims for more than 200,000 students have yet to be processed by the Education Department.

“It’s been proven with evidence that Corinthian was a fraud and the law says that students do not have to pay fraudulent loans,” said Alicia Davis, a former student at Corinthian College. “We’ve already been scammed by our school; we’re not going to let the Department of Education scam us now too.”

DeVos’ announcement comes the same day the Federal Trade Commission announced it had reached a $119 million settlement with the University of Phoenix over allegations the for-profit college system used deceptive advertising to lure students.

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