Demanding that Betsy DeVos Grant Relief to Thousands of Eligible Student Borrowers
This week, Attorney General Racine and a coalition of 20 states called on U.S. Department of Education (ED) Secretary Betsy DeVos to help student borrowers who attended schools that abruptly closed have their loans discharged. Many of these schools were predatory, for-profit institutions.
In a letter, AG Racine demands that Secretary DeVos fulfill her obligation under federal law to provide immediate and automatic loan relief to borrowers who attended a school when it closed on or after November 1, 2013, and who did not subsequently re-enroll in an eligible program within three years from the date the school closed. It’s estimated that tens of thousands of students nationwide who attended any of the 1,400 schools that closed are eligible for an estimated $400 million in automatic debt relief. The law requires Secretary DeVos to automatically discharge these borrowers’ loans, but she has not.
Here is an excerpt from the letter sent to Secretary DeVos:
Dear Secretary DeVos:
We, the undersigned Attorneys General of California, Massachusetts, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Iowa, Kentucky, Maine, Maryland, Minnesota, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, and Washington, call on the U.S. Department of Education (“Department”) to immediately discharge the loans of borrowers eligible for automatic closed-school discharge under 34 C.F.R. §§ 674.33(g)(3)(ii), 682.402(d)(8)(ii), 685.214(c)(2)(ii). These regulations require that the Department automatically discharge the student loans of borrowers who attended a school that closed on or after November 1, 2013, and who did not subsequently re-enroll in a title IV-eligible program within three years from the date the school closed. Approximately 1,400 schools closed in 2014 and 2015, including the various schools owned by Corinthian Colleges.1 Under the Department’s automatic closed-school discharge regulations, tens of thousands of borrowers who attended these schools are now entitled to have their federal student loans discharged without any further action on their part. The Department has no discretion to withhold discharges of these loans and should effectuate them immediately.
Our offices have firsthand experience with for-profit schools that have closed abruptly mid-year. The students of those schools receive no benefit from a partially completed program but have typically incurred substantial federal student-loan debt. Worse yet, numerous investigations and enforcement actions undertaken by our offices have revealed widespread misconduct on the part of closed for-profit schools. These schools frequently deceive and defraud students, employing a multitude of unlawful tactics to obtain federal student-loan funds without delivering an education of value to students. When their misconduct is uncovered by enforcement actions, schools have closed and filed bankruptcy, leaving students deeply indebted and with no source of redress, while school executives move on unscathed to their next venture. In just the last few years, for example, state attorneys general played a critical role in uncovering widespread misconduct at Corinthian Colleges, American Career Institute, and Westwood College, all of which closed without warning.
This is just the latest effort by AG Racine to make sure that student borrowers get the relief that they are entitled to under the law. Other recent efforts include urging Secretary DeVos to and for blocking a rule that ensures student borrowers can get debt relief when they are defrauded by predatory schools.
OAG offers several tools to help student borrowers navigate repayment and consolidation options and avoid scams on our website. Visit our to learn more!