In Victory For Borrowers, DeVos Agrees To Stop Issuing Mass Denials Of Loan

Student loan borrowers scored a victory in court this week against Education Secretary Betsy DeVos, as litigation continues over mass denials of student loan forgiveness applications.

The case, Sweet v. DeVos, concerns the troubled Borrower Defense to Repayment program. The Obama administration enacted regulations governing this loan forgiveness program in 2016 to provide student debt relief to students who were misled, defrauded, or otherwise harmed by predatory colleges and universities – often, for-profit schools.

Under Secretary DeVos, however, the Department of Education rewrote the rules governing the Borrower Defense program. New regulations that went into effect on July 1 of this year substantially weakened the Borrower Defense relief provided to student loan borrowers by increasing the burden of proof required to prevail, and imposing a strict statute of limitations.

Borrower advocates previously accused DeVos and the Department of Education of deliberately holding up the processing of nearly 170,000 Borrower Defense applications, in some cases for years. A Department spokesperson previously disputed this, stating that some applications were in fact processed, and that the Department did not process additional applications due to ongoing litigation.

A recent preliminary settlement agreement in the Sweet v. DeVos case would require the Department to process the remaining thousands of delayed Borrower Defense applications. However, as the settlement was being finalized, student loan borrowers accused the Department of skirting the spirit of the settlement agreement by, essentially, arbitrarily denying relief to nearly everyone. “Since the preliminary settlement in Sweet, [the Department of Education] has been issuing blanket denials of borrower defense applications,” said the Project on Predatory Student Lending — which is representing the borrowers — in August. “The notices don’t make any sense, [and are] in violation of the law and [settlement] agreement.”

The borrowers also noted that in some cases, the Department’s decisions were “nonsensical.” Citing an example, attorneys for the student loan borrowers pointed to a case where the borrower alleged that ITT Technical Institute engaged in misconduct related to “Educational Services.” The Department denied the borrower any relief, stating simply: “This allegation fails for the following reason(s): Educational Services.” In other cases, the Department indicates its decisions were based on unspecified evidentiary materials, which it then refused to provide to borrowers upon request. The Department disputed the characterizations of its Borrower Defense decisions.

In October, Judge William Alsup of the U.S. District Court in the Northern District of California slammed DeVos for her agency’s actions. “The Secretary’s new perfunctory denial notices… contradict her original justification for delay, raise substantial questions under [federal law], and may impose irreparable harm upon the class of student-loan borrowers,” Judge William Alsup, of the U.S. District Court in the Northern District of California, wrote in his decision.

In yesterday’s ruling, and in response to new filings by attorneys representing the student loan borrowers, Judge Alsup noted that DeVos has agreed to stop issuing mass denials to Borrower Defense applications while the Sweet v. DeVos litigation continues. Alsup ordered DeVos to provide the court with two weeks notice if her position changes. The order also notes that borrowers will not have to make any payments on the applicable student loans until there is a final ruling in the case.

Given that DeVos will remain Secretary of Education for less than two more months — at which point President-Elect Biden will appoint someone to replace her — this effectively means that there will be no more mass denials of Borrower Defense applications by DeVos. Biden and Vice-President Elect Harris have both expressed strong support for the Borrower Defense program, and Biden is widely expected to appoint a more borrower-friendly person to lead the Department of Education.

“This order making sure that Secretary DeVos cannot continue issuing blanket denials at will is an important step for our clients, who have…

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