Corinthian College borrowers are being graded on a curve for student loan relief

Almost 100,000 student loan borrowers — already scammed by the notorious and now-shuttered Corinthian Colleges — are now being graded on the worst curve of their life.  Under a new set of calculations implemented by Betsy Devos’ Department of Education, whether of not they get their student loans canceled depends on how their classmates have done since graduation

The math behind the new approach is opaque, but one thing is clear: it needlessly denies debt relief to borrowers based on how well their classmates did and replaces a straight-forward program put in place under the Obama Administration.

Corinthian Colleges, Inc. was the umbrella organization for a suite of for-profit schools that operated from 1995 until 2015 when they shut their doors amid mounting allegations that they falsely inflated job placement rates and misrepresented programs to potential students.

As a federally certified school, Corinthian Colleges’ students could take out federal loans.  At the height of its operations in the mid-2000s, Corinthian Colleges received more than $1.5 billion in federal student aid and had tens of thousands of enrolled students each year.

When Corinthian’s misconduct became apparent in 2015, the Department of Education allowed students to apply for cancellation of their student loans under the borrower defense program.

Between December 2015 and April 1, 2018, more than 147,000 borrower defense claims were filed.  The outgoing Obama Administration used a simple and straight forward test to assess applications.  If the borrower had enrolled in the same program, at the same location, and the same time as Corinthian had made material misrepresentations, the borrower filed an attestation with the Department and had their loans cancelled.

Approximately 25,000 of those borrowers had their claims adjudicated before the Trump Administration came into office on January 20, 2017 and the process came to a screeching halt.  When applications began to be processed again later in 2017, a new system was in place.

Devos’ Department of Education had taken the entire cohort of borrowers who applied for cancellation and got the aggregate 2014 earnings data from the Social Security Administration, comparing it to the aggregate earnings data for other students in similar programs.  If a borrower’s cohort as a whole had done fairly well, each individual Corinthian student got less of their loans cancelled than if the cohort had done badly.

For instance, the cohort of Corinthian students who enrolled in the “Electrical/Electronics Equipment Installation and Repair, General” associates degree have about 50% of the current earnings of students in similar programs at other schools.  Under the new program, each borrower — no matter their individual earnings — will get 50% of their loans forgiven.

The cohort of Corinthian students who enrolled in the “Medical Office Management / Administration” associates program have between 70-79% of the current earnings of their peers, meaning they will get 30% of their loans forgiven, but the “Business Administration and Management, General” certificate-earners will get 100% of their loans forgiven.

The new math used by the Department of Education is troubling for many reasons: why should the amount of debt relief offered to students who were reeled in by Corinthian college be tied to the success of their peers?  There could be any number of factors affecting the cohort rate, such as the age of borrowers and the particular students who applied for cancellation.   The success of one’s peers across 20 years is an exceptionally poor way to measure the impact of material misrepresentations and fraud on any one person.

A lawsuit brought by Housing and Economic Rights Advocates and the Harvard Law School’s Predatory Loan Project on behalf of the class of Corinthian College students alleges violations of administrative procedure rules in the sudden switch of programs.  There are also allegations that the new program violates constitutional Due Process rights and is arbitrary and capricious.

The class members have sought a preliminary injunction, forcing the Department of Education to go back to the old system.  The Department of Education has opposed the preliminary injunction.  The District Court in California should rule soon.  In the meantime, every day interest continues to accrue on Corinthian College loans.

 

Note: Many of the citations for this article are from court filings that can be found via the federal court management system, PACER.  If for some reason you would like the documents that support this post, please let me know directly.  Some of them you can find for free online through the RECAP project.  Others I am in personal possession or you can access with your own PACER account.
DISCLAIMER: THIS BLOG POST IS NOT LEGAL ADVICE AND DOES NOT CREATE AN ATTORNEY-CLIENT RELATIONSHIP BETWEEN THE READER AND MAURER LAW LLC.  SEEK LEGAL ADVICE IF YOU HAVE PARTICULAR QUESTIONS ABOUT YOUR STUDENT LOANS.

Eligible Veterans Should Get Automatic Student Loan Discharges. Instead, They’ll Just Get a Notice.

Thousands of veterans should be eligible to have their student loans completely discharged with no tax liability — if only they knew about the program and applied.

For years, two government agencies — the VA and the Department of Education — have had the power to identify these individuals.  The VA had the list of veterans who either had a service-connected disability that is 100% disabling, or were totally disabled based on an individual unemployability rating.  Meanwhile, the Department of Education had the list of Americans who had taken out federal student loans through the National Student Loan Data System (NSLDS).

Cross-matching these lists would identify veterans who would be granted a Total and Permanent Disability Discharge if only they applied.  Efforts in 2016 to produce a similar list of individuals receiving social security disability who had student loans identified more than one hundred thousand such people.

Seems like a no-brainer that should have happened years ago, right?  Well, in a press release, the VA and the Department of Education finally announced that they would be teaming up to find these veterans and let them know about the benefits they are entitled to.

However, currently the plan is just to notify these borrowers.  In my experience, merely notifying borrowers will not be enough.  For a variety of reasons, the information may slip through the cracks or the veteran may not have the resources to follow up on it.

A bipartisan group of senators have recently advocated for an automatic discharge that would require no follow-up by the borrower.  This proposal is particularly compelling now that the 2018 tax bill eliminated the tax on disabled borrowers who had their forgiven student loan debt.

With this loophole gone, there is no downside to automatically discharging student loan debt for disabled veterans — except that the Department of Education will not get the marginal amount of money that these veterans continue to pay while they remain unaware they could have the loans discharged.

The announcement by the Department of Education and the VA is a step in the right direction, but it does not go far enough.

DISCLAIMER: THIS BLOG POST IS NOT LEGAL ADVICE AND DOES NOT CREATE AN ATTORNEY-CLIENT RELATIONSHIP BETWEEN THE READER AND MAURER LAW LLC.  SEEK LEGAL ADVICE IF YOU HAVE PARTICULAR QUESTIONS ABOUT YOUR STUDENT LOANS.