Judge: By Resigning, DeVos Opens Door to Deposition on Student Debt Relief

As a private citizen, former Education Secretary Betsy DeVos can no longer avoid answering questions in a class action claiming her policies permanently damaged the finances of student borrowers defrauded by for-profit colleges.

Former Education Secretary Betsy DeVos waits to testify before a House Committee on Appropriation subcommittee hearing in 2018. (AP Photo/Pablo Martinez Monsivais)

SAN FRANCISCO (CN) — As a cabinet official, Education Secretary Betsy DeVos was virtually immune to demands that she be grilled about long delays and mass denials of student debt relief claims in a pending lawsuit. When she resigned from office last week, that changed.

On Tuesday, U.S. District Judge William Alsup issued a terse, 1-paragraph order stating that because DeVos is no longer Education secretary, she is now fair game for a deposition.

A prior order temporarily forbade deposing Secretary DeVos, but “it imposed no such restriction regarding Citizen DeVos,” Alsup wrote.

DeVos quit her job Jan. 7 in the wake of a deadly mob attack on the U.S. Capitol that many blame President Donald Trump for inciting, writing in her resignation letter that “we each have a moral obligation to exercise good judgment and model the behavior we hope [impressionable children] would emulate.”

On Monday, lawyers for a class of student borrowers seized on the recent development to request that DeVos immediately submit to a deposition. They said interviews with other Education Department officials suggest the former secretary has unique knowledge on decisions to stop processing borrower defense claims for 18 months and to use boilerplate letters to deny virtually all debt relief applications.

“All discovery thus far suggests that former Secretary DeVos drove the policies that caused the delay, developed and disseminated the pretextual excuses for the delay, and has knowledge about the development of the denial letters,” the attorneys wrote in a 3-page letter to the court Monday.

This past October, Alsup refused to let DeVos be questioned, citing court precedent holding that high-ranking government officials should not be made to testify on executive decisions except in rare situations. The judge also refused to rule out making DeVos testify later if “extraordinary circumstances” warrant it.

The precedent that cautions against deposing cabinet-level officials stems from the U.S. Supreme Court’s 1941 ruling in United States v. Morgan, finding it was improper for a lower court to make the Agriculture secretary be deposed and testify at trial in a lawsuit over maximum rates for stockyard services.

In a statement Monday, plaintiffs’ attorney Eileen Connor of the Project on Predatory Student Lending at Harvard Law School said only DeVos can answer questions to which the court has demanded answers.

“It has become evident that as Education secretary, Betsy DeVos personally drove policies that delayed justice for students,” Connor said. “She has the obligation to explain why defrauded student borrowers were ignored for years by the Education Department and then summarily denied their rights, and that obligation does not expire with her resignation.”

Lead plaintiff Theresa Sweet sued DeVos in June 2019, claiming the department’s “pause” in processing borrower defense claims became a “policy of inaction and obfuscation” preventing defrauded students from obtaining debt relief as required by law. Plaintiffs say the long delays left more than 160,000 students “in limbo,” damaged their credit and permanently delayed their accumulation of wealth.

Enacted in 2015 by the Obama administration, the borrower defense rule gave students who attended predatory for-profit colleges an avenue to have their loan debt forgiven. The rule was enacted as the government started cracking down on for-profit schools including ITT Technical Institute, Corinthian Colleges and DeVry University, which were investigated for deceiving students about post-graduation job prospects.

In April, DeVos agreed to settle the class action, vowing to process more than 170,000 outstanding claims within 18 months and to wipe out interest that accrued on loans while the borrower defense claims were pending.

Judge Alsup preliminarily approved the proposed settlement in May, but later rejected the deal after complaints emerged about the department’s use of “boilerplate language” to deny 94% of claims, including for students who attended schools that were found to have engaged in fraud by the Federal Trade Commission and other federal and state agencies.

The plaintiffs presented evidence that each denial consisted of “boilerplate language” plugged in from a set of predetermined responses, such as “insufficient evidence,” “failure to state a claim under borrower defense regulation” and “other.” They argued the lack of specificity made it impossible for them to meaningfully appeal the denials.

In a ruling this past October, Alsup found the department was “issuing perfunctory denial notices utterly devoid of meaningful explanation at a blistering pace” and forcing borrowers to cope with a “disturbingly Kafkaesque” process for obtaining debt relief.

Alsup also ordered Education Department officials to provide expedited discovery to the plaintiffs on the use of boilerplate denial letters.

The plaintiffs interviewed Diane Auer Jones, principal deputy undersecretary; Colleen Nevin, director of Borrower Defense at Federal Student Aid (FSA); Mark Brown, chief operating officer of FSA; and James Manning, former acting undersecretary and former acting CEO of FSA.

Plaintiffs’ lawyers say none of those officials could identify who approved directives to delay processing borrower defense claims or to use boilerplate form letters to deny claims.

The plaintiffs are scheduled to file a motion for summary judgment in the case by March 11, but the case could become moot by then as the incoming Biden-Harris administration is expected to adopt policies more friendly to student borrowers who claim to be victims of fraud.

The U.S. Education Department did not immediately respond to an email requesting comment Tuesday.

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