200,000 student loan borrowers who say they were ripped off can get their loans

“This important proposed settlement will provide answers and certainty to borrowers who have fought long and hard for fair resolution of their borrower defense claims after being defrauded by their schools and ignored or even rejected by their government,” said Eileen Connor, director of Hunter for Plaintiffs. Student loans and co-counseling schemes.

There are also critics of the settlement, who argue that it is a blatant attack on dozens of largely for-profit colleges and could be used by the department to wipe out the debt of many more borrowers outside of the lawsuit.

The settlement named the schools that were allegedly at fault, but was not investigated

The settlement has sparked outrage from for-profit college leaders and advocates. The source of that outrage is a list of 153 mostly for-profit colleges.

Borrowers who are part of a class action suit and who attended any of these 153 schools are entitled to full and automatic relief from their federal student loans.

The settlement said these schools were included because they “engaged in substantial misconduct … whether credibly alleged or in some cases proven.”

That doesn’t sit well with some higher education experts.

“Just because someone accuses a school of fraud doesn’t mean it happened,” said Carlo Salerno, senior economist at Ilusion and a longtime industry watcher. “[A school] For example, one might inadvertently list a graduation rate that was incorrect. Maybe it wasn’t a mistake because they were trying to be fraudulent as much as a data error or clerical error.”

Critics of the settlement also point out that the Department of Education rarely investigated any of these schools — let alone confirmed wrongdoing.

In a legal memo protesting the settlement, Everglades College, Inc. Its attorneys, whose schools are among the 153 listed, allege that, “in most cases, all departments have unsubstantiated and still litigable allegations, but the agency nevertheless finds schools guilty without due process or explanation.”

“This is a farce,” the memo says.

In another legal challenge to the proposed settlement, the Chicago School of Professional Psychology (TCSPP) “strongly denies these allegations and is willing to submit contrary evidence and arguments to this court that the parties clearly will not do so.”

Many of the schools on the list have been the target of federal or state-level consumer protection investigations, though not all. Some settled without admitting wrongdoing. Most were not subject to enforcement by the department or lost access to federal student loans.

“We have a lot of concerns,” said Jason Altmaier, president and CEO of Career Education Colleges and Universities (CECU), a group that represents many of the schools on the list.

“It doesn’t appear that the department did an individual review of each of these claims. In fact, they themselves said they didn’t,” Altmeier said.

One reason is practical: the department has a lot of complaints to process. The whole point of litigation and settlement is to do so eventually and efficiently.

In a statement, Education Secretary Miguel Cardona said the department was “pleased” to have reached an agreement “that will provide billions of dollars in automatic relief to approximately 200,000 borrowers and that we believe will resolve the plaintiffs’ claims in a manner that is fair and equitable to all parties.”

And there’s no doubt, Altmire said, that these borrowers deserve a lot of help.

“Any student who was part of a school that intentionally misrepresented information to that student and was harmed by that student, without question, that student should be the first in line to have their claim heard,” Altmeier said. But, “without some kind of independent review, we wonder how you can determine whether a student has been harmed.”

Altmeier said some of the schools on the list had no idea they were included — or that borrower defense complaints had even been filed against them.

“We see it as a problem,” Altmaier said, because it’s causing “nominal harm” to schools

Some of the schools on the list are still accepting students

Schools still open on the settlement’s “significant misconduct” list include the popular University of Phoenix, which enrolled nearly 84,000 students with degrees in 2020.

In 2019, Phoenix agreed to cancel $141 million in loans owed to the school and refund $50 million to students after the Federal Trade Commission alleged the school used deceptive advertising.

But, the university avoided litigation by settling. In a statement after the settlement, it said it “believes it acted appropriately and admits no wrongdoing.”

its inclusion sweet Settlements with other open schools, Altmayr feels the department is using the borrower defense to “weaponize it against [for-profit college] sector.”

The University of Phoenix did not respond to multiple NPR requests for comment.

Everglades and Keizer University – Everglades College, Inc. are both open. In Everglades’ legal memo protesting the settlement, the agency said it was not aware students had made claims against its school.

“Incorporation of Departments [Everglades and Keiser] Already causing reputational damage, because third parties are treating this as an impartial finding of wrongdoing by the schools rather than a waiver of litigation created in a secret agreement with the school’s accusers,” the memo said.

Salerno also worries about this message.

“While I’m sympathetic to departments trying to clear the decks … telling current students does a lot of unintended damage … that, you know, your degree might be a fraud., Before you even get one or try to engage with it.”

What it looks like when a college cheats its students

Borrower Alicia Davis wants to be clear: her educational experience was a sham

He remembers the salesperson at Florida Metropolitan University who assured him in 2006 that the school was a great fit.

“He gave me a good chase,” Davis recalled. “‘You’re guaranteed a job!’ “

But after enrolling, Davis quickly realized the school had nothing to offer him. And when he transferred, he was surprised to hear his credits were worthless.

“That’s when I realized, I was like, ‘Okay, there’s something really wrong with this.‘”

Davis was furious and refused to pay back the federal student loan money he had taken out.

“I was like, ‘Take me to court, I’m not paying you a dime.’ “

In the end, it was Davis who took the Department of Education to court – as one of seven named plaintiffs Sweets vs. DeVosnow Sweet vs. Cardona.

Unrelated to the lawsuit, the Biden administration finally processed and approved Davis’ borrower defense claim earlier this year. His Florida Metropolitan debt was wiped out in February.

“I cried in the restaurant I was in with all these tourists,” Davis recalls, “and they were looking at me like I was crazy. But, you know, at that moment, I realized that all my hard work and everything—I Finally got rid of this debt that has been haunting me for 15 years.

Davis said he hopes so sweet The settlement will be approved so that other borrowers in the case can experience the same joy, the same freedom.

The settlement may include a back door to larger student loan cancellations

Because the lawsuit was triggered by the department’s refusal to review the claim, the settlement guarantees a certain amount of time to any borrower who files a claim between June 22, 2022, when the settlement is announced, and when it becomes final (if it ever does).

Eileen Connor, co-counsel for the plaintiffs, said these borrowers “will have a deadline” — a three-year review period. “And if the department is not able to resolve their borrower defense applications within that time frame, their loan will be canceled.”

It doesn’t matter where these borrowers went to school or if they can prove they were defrauded. If the department takes more than three years to review their case, their loan will be written off.

There is no reason to believe the Department will not meet this timeline – as part of the settlement, it is committed to processing claims more efficiently. But, in its legal memo, Everglades College, Inc., suggests the department may be dragging its feet to achieve greater debt cancellation.

“If the Department of Education encourages every debt holder in America to file a borrower-protection petition before this court approves the proposed settlement, then within three years the Department of Education could unilaterally cancel all federal student loan debt — and refund the previous payments. on — simply by not acting,” the memo warns.

But Connor said “this settlement is a sham loan-cancellation agreement … either a deliberate misrepresentation or an embarrassing misunderstanding of the basic facts.”

The department has already received more than 60,000 borrower defense applications since the parties agreed to the proposed settlement, according to a department spokeswoman.

Borrower advocates say one thing is still missing: accountability

The Biden administration is much more inclined than the Trump administration to cancel the loans of students who say they were defrauded.

Earlier this month, the Department of Education unveiled a rewrite of the borrower defense rule – to streamline it and, in many ways, reduce the burden of proof for borrowers.

The department’s willingness to investigate and hold bad actors accountable is less clear.

“The settlement requirement represents the government’s failure to proactively police these institutions in the first place,” said Dan Ziebel, chief counsel and co-founder of the borrower advocacy group Student Defense.

“We’re not necessarily addressing the root of the problem,” said Dominic Baker, professor of education policy at Southern Methodist University.. “If you know an institution has done enough wrong that if someone applies for their student loan forgiveness and you’re going to automatically approve it, the real question is: Why would you allow someone to take out another student loan from them? “

What’s more, Connor said, there’s nothing in the settlement that commits the Education Department to investigating any schools on its misconduct list.

True accountability would require that the department formally investigate a school, gather evidence and allow the school to defend itself — a due process that some for-profit college advocates and experts welcome.

“Schools deserve their day in court,” Salerno said.

In response to questions about NPR’s enforcement efforts, the department said through a spokeswoman that it could not comment on institutional oversight activities, program reviews or investigations, but that it re-established the federal student aid Office of Enforcement last fall and filled key positions. Borrower’s defense, strategy and investigations.

“Our actions to date demonstrate our renewed focus on holding schools accountable for putting students’ interests first,” a department spokeswoman told NPR.

For proven bad actors, the department can hold executives personally liable for the costs of their fraud. It could also exclude schools from the federal student loan program—a possible death sentence for any school. Otherwise, what will prevent more students from getting cheated?