Full loan relief rare for students at for-profit colleges
October 29, 2018
The Trump administration is granting only partial loan forgiveness to the vast majority of students approved for help because of fraud by for-profit colleges, according to preliminary Education Department data obtained by The Associated Press.
The figures demonstrate the impact of Education Secretary Betsy DeVos' new policy of tiered relief, in which students swindled by for-profit schools are compensated based on their earnings after the program.
Of the roughly 16,000 fraud claims approved thus far by the Education Department under DeVos, slightly more than 1,000 students received full forgiveness on their loans, according to an AP analysis of the data.
DeVos has been pushing to ease regulations for the for-profit sector and raise the bar for students seeking relief for fraud. Critics say DeVos, who has hired officials from the for-profit sector to top positions in her agency, is favoring industry interests. But DeVos counters that the previous approach was unfair to taxpayers who ended up paying for those forgiven loans. She says the new process will enable students to get their claims considered more quickly and efficiently and will be more balanced instead of an "all-or-nothing" approach.
More than 165,000 claims have been filed since the loan forgiveness program launched in full in 2015 under the Obama administration. A total of nearly 48,000 claims have been approved through the end of June.
Since DeVos took over, the agency has reviewed more than 25,000 claims.
Partial forgiveness awards have covered on average about 30 percent of a student's outstanding loan, with the median loan of roughly $11,500 reduced to about $7,800, according to the data. The department computes the amount erased by comparing their income to peers in similar programs.
The statistics were collected over the summer in preparation for a report on loan relief claims that the agency must submit to Congress. The department has previously not provided such information publicly.
More than 9,000 loan forgiveness claims have been denied under DeVos, according to the data. The Obama administration didn't issue any denials, but DeVos' Education Department has said many of the claims that it rejected had actually been identified for denial, but never acted on, by the previous administration.
Of the total number of claims approved by the Obama and Trump administrations, about 31 percent have received partial relief, according to the data provided to the AP. However, the Obama administration didn't grant partial loan forgiveness on any of the claims it approved.
Asked for comment, Education Department spokeswoman Liz Hill pointed to DeVos' remarks in December rolling out the partial relief program.
"No fraud is acceptable, and students deserve relief if the school they attended acted dishonestly," DeVos said at the time. She said the new process "will allow claims to be adjudicated quickly" and "also protects taxpayers from being forced to shoulder massive costs that may be unjustified."
Kimberly Fe, 53, studied medical administration and billing at a Corinthian college in California. She said she received poor quality education and was deceived into believing that her credits would transfer to four-year colleges, which wasn't the case. The Education Department recently notified Fe that it has forgiven some $2,000 out of $7,000 of her federal student loan.
"It was just a money- making machine," Fe said. "I want my money back, I want my time back."
The for-profit industry experienced a boom over the past two decades, with enrollment rising from around 230,000 in the early 1990s to a record 2 million in 2010. The sector benefited from federal student loans and the fact that the global financial crisis left many Americans jobless and eager to go back to school to master new skills and get new credentials.
The schools recruited aggressively, often making deceptive statements about job prospects and delivering subpar education, which left many students with meaningless degrees and a mountain of debt. The Obama administration went hard after the sector, closing down two major for-profit chains, Corinthian and ITT, and spent $550 million to forgive students' loans. Tens of thousands of students had their loans fully erased under the Obama administration, but an even bigger backlog remained.
DeVos took a different approach. In December she announced a new system of partial relief that would be determined by how students fared financially after graduating or participating in a program. DeVos is also seeking to weaken or scrap Obama-era regulations meant to police for-profits and help defrauded students get their loans forgiven.
"It's very self-evident in the policies that they are proposing and implementing that they are there to look out for the for-profit colleges," said Clare McCann, a higher education expert with New America, a Washington-based think tank.
The tiered system was challenged in a lawsuit filed by Project on Predatory Student Lending at Harvard University, a legal aid clinic that is representing defrauded students. In June, a federal judge ordered the department to halt partial relief for students, ruling that the method that it used to calculate the amount was unacceptable.
But Michael Dakduk of Career Education Colleges and Universities, the industry's largest trade group, hailed DeVos' efforts to reform industry regulations.
"Unlike the previous administration, the current administration appears to more concerned with supporting students at all colleges and universities — regardless of tax status," Dakduk said in a statement. "Now is the time to move beyond ideological attacks on any one sector of higher education and establish a uniform commitment to transparency of outcomes that can stand the test of time."
Preston Cooper, an analyst with the conservative American Enterprise Institute, said the tiered system reflected DeVos' attempt to strike a balance between protecting the interests of students and taxpayers.
"This partial forgiveness operation, it's not perfect, it's hard to come up with a perfect solution," Cooper said. "I would say the administration is pursing partial relief and they are trying to find one way to negotiate this balance."
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