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Thousands of scammed student loan borrowers have filed for debt relief — the feds haven’t approved any in over a year

Over the past year, the Department of Education has received tens of thousands of applications for student debt relief from borrowers who say they were scammed by their schools.

The agency has not approved any.

That’s according to data obtained from the Department and released Wednesday by the office of Senator Patty Murray, the ranking Democrat on the Senate Health, Education, Labor and Pensions Committee, which oversees the Department.

Between June 30, 2018 and March 31, 2019, more than 74,000 requests for debt relief poured into the agency.

As of March 31, 2019, the Ministry has received 239,937 requests for debt relief from these borrowers with 179,377 requests pending. As of that date, the agency had approved 47,942, a number that hasn’t budged. since June 30, 2018. The number of refusals has also not increased since the end of June 2018.

But the number of applications received by the Department during this period has steadily increased. Between June 30, 2018 and March 31, 2019, more than 74,000 requests for debt relief poured into the agency.

Murray derided the Department’s inaction on the claims as “shameful,” in a statement. “There is nothing stopping Secretary DeVos from immediately approving the claims except her apparent disdain for borrowers, and I will continue to urge her to provide students who have been cheated or defrauded by predatory for-profit colleges the relief that they are entitled.”

Critics of the Trump administration have derided the Department’s approach to the borrower advocacy process and say it’s part of a larger DeVos-era agency scheme favoring college interests. for profit relative to the borrowers. Earlier this year, the agency repealed a rule developed by the Obama administration that was intended to ensure that graduates of vocational training programs – which are mostly at for-profit colleges – earned enough to repay their loans.

The data is the latest development in a battle over the fate of borrowers who have been scammed by their schools.

The fight over the future of for-profit colleges even reached the Democratic debate stage in Detroit on Tuesday night. In response to a question about why he does not support Sen. Bernie Sanders’ proposal to write off all student debt, South Bend, Indiana Mayor Pete Buttigieg said that if he were to write off the debt, it would “start with for-profit colleges.” that took advantage of people, especially veterans.

“Under President Obama, they were held accountable for their results,” he said. “President Trump, under the direction of a Secretary of Education who, unfortunately, is from this state, removed these rules,” he said. “There is no accountability.”

The data released by Sen. Patty Murray exclusively to MarketWatch is the latest development in a years-long battle over the fate of borrowers who have been scammed by their schools into debt. Under a law, known as the repayment defense, these borrowers have the right to have their federal student debt forgiven.

But the law, which has been on the books since the 1990s, was only widely used in 2015, when former students from the now defunct for-profit chain Corinthian Colleges, organized by activists, started asking for help under the law. This pressure helped convince the Obama administration to create a more formal process that borrowers could use to file claims for relief.

The Department of Education under Education Secretary Betsy DeVos tried unsuccessfully to rewrite the rules. The agency and DeVos are also facing a class action lawsuit from borrowers, accusing officials of unlawfully blocking their decision on their claims.

Borrowers describe how their debt has prevented them from buying homes, and even delayed marriage or children.

In nearly 900 affidavits submitted as part of the lawsuit earlier this month, borrowers describe how their debt prevented them from buying homes or cars and delayed major life events, such as marriage or children. . They allege for-profit colleges tricked them into attending and going into debt to pay for it with the promise of a better future. In fact, many say they are worse off than before their participation.

Liz Hill, a spokeswoman for the Department, wrote in an emailed statement that ongoing litigation has prevented the agency from adjudicating the claims. The agency was sued last year over a plan to use a formula to determine whether certain borrowers who attended Corinthian colleges and filed borrower defense claims might be eligible for a partial discharge from their loans instead of a complete discharge.

A federal district court judge ruled last year that the Department’s approach violated the Privacy Act and ordered the agency to stop collections on former Corinthian students while legal issues are settled. The government appealed the decision, Hill noted. But with the Department’s process for determining a borrower’s level of harm “held in court,” Hill wrote, the agency cannot move forward with assessing claims.

“The department has a duty to protect students from fraud while safeguarding taxpayer dollars,” she wrote.

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John Smith

The author John Smith