California, New York and 6 Other States Side with Scammed Students in Battle with DeVos

Via MarketWatch 

Source: Flickr.com 

By: Jillian Berman

Several states are throwing their support behind scammed student-loan borrowers hoping for relief.

Led by Xavier Becerra, the attorney general of California, eight states including, Massachusetts, New York and Illinois, filed an amicus brief [last] Wednesday in a closely-watched class-action lawsuit challenging Betsy DeVos-led Department of Education’s approach to calculating relief for federal student-loan borrowers who say they’ve been scammed by their schools.

An amicus brief, also known as a friend-of-the-court brief, allows entities with an interest in the litigation to weigh in with what they believe to be relevant information about the case.

At issue in the case is whether the agency can legally provide only a partial discharge of federal student-loans a group of borrowers acquired to attend Corinthian Colleges, a for-profit college chain that collapsed in 2015 amid claims the school misled students about job placement and graduation rates. During the Obama administration these borrowers received a full discharge of their loans.

In the brief, the states’ attorneys general argue that these borrowers are entitled to full relief under the law, known as borrower defense, which aims to make federal student-loan borrowers whole who have been defrauded by their schools.

“Amici States have a strong interest in safeguarding the economic well-being of their residents who the Department has already determined are qualified for complete cancellation of their federal student loans because they were defrauded into attending various educational programs offered by Corinthian,” the state attorneys general write in the brief.

. . .

Other states, including Massachusetts and Illinois, provided the Department with thousands of pages of evidence that Corinthian violated the law in their state, according to the brief. What’s more, state attorneys general offices took pains to find residents who might be eligible for relief.

The states hired a company to the tune of at least $290,000 to coordinate contacting borrowers, according to the brief. They also created their own bespoke outreach efforts. For example, in Massachusetts, the attorney general’s office held 19 workshops across the state to help students fill out the claim form. They also called, emailed and mailed letters to borrowers who were likely qualified for relief.

The states “spent significant resources trying to ensure that people who were eligible for loan cancellation because of Corinthian fraud would get it,” said Eileen Connor, the director of Harvard Law School’s Project on Predatory Student Lending, one of the organizations representing the borrowers. “It’s just really outrageous that the Department really capriciously turned away from that.”

The policy being challenged in the suit would allow for borrowers determined by the Department to have received some benefit from their education — based on whether the average earnings of their Corinthian program is 50% or more of the earnings of a typical graduate in a comparable program — to receive only a partial discharge of their loans.

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