After Students Testify, Judge Slaps DeVos For Wholesale Rejection of Loan Relief
Late Monday, a federal judge rejected a settlement of a class action lawsuit brought by former students who say they were defrauded by their for-profit colleges and want Betsy DeVos’s Department of Education to stop delaying action on their claims to have their student loan debt cancelled. Judge William Alsup of the U.S. District Court in San Francisco ruled after holding an October 1 hearing, via Zoom, where people could address the court in favor of or against the settlement. In that settlement agreement, DeVos’s Department committed to move ahead with review of the students’ claims.
After listening to the hearing’s speakers — all former students at for-profit colleges — Judge Alsup apparently concluded that DeVos’s word wasn’t good enough.
More than 200 former students asked for the chance to address the court, and Judge Alsup allowed fourteen to speak at the hearing. Each speaker described being deceived and abused by a for-profit school and being left worse off than when they started, usually with no advance in career prospects and always with overwhelming debt. Some also explained that the DeVos education department had rejected their claims for debt relief, filed under a federal law that provides for cancellation of loans where a student can show illegal deception by a school, without offering any specific or coherent reason. Others have been waiting years with no decision from DeVos.
Some 160,000 former students, most of them ex-attendees of for-profit colleges, have filed claims for debt relief under this law in recent years.
Yvette Colon, a former student at now-closed Sanford-Brown Institute in New York told the court, “I went to Sanford Brown in New York City because they promised that I could become a licensed sonographer, and I wanted to help people. Only after I signed up for private and federal student loans did I discover that the school had lied. They were not accredited the right way. I couldn’t even sit for the licensing exam! The Department of Education has known about this fraud for years, because the New York Attorney General investigated and got Career Education Corporation to enter into a settlement. But without any explanation, the Department decided that this deception does not matter.”
Rachel Greenbaum, who attended the now-closed Brooks Institute of Photography, told the judge, “Our applications deserve real and legitimate consideration, not just a blanket denial. We should be given all the reasons why so we can launch a factual appeal. We’ve been lied to and robbed blind with the Department of Education’s stamp of approval.”
Victoria Linssen, another former Brooks student, testified that as a result of debt accrued from attending the school, “I lost my job, livelihood, home, car, was out of work for four years, was forced to move seven states and 1,800 miles away from my family to get work.” Meanwhile, Brooks, she said, “continued to defraud and take new students up until the day they filed for bankruptcy.”
Even for members of the public (like me) following the hearing via audio link only, Judge Alsup seemed to be taking in every powerful word of the former students’ testimony. He carefully asked each speaker who had not already covered this information where they were from and how much student debt they had. After years of bloodless court arguments over Obama and Trump administration regulations and processes regarding for-profit college accountability and debt relief, finally, in a federal court of law, humans were telling a judge that for-profit colleges had scammed them and that the Secretary of Education didn’t seem to give a damn.
In his opinion Monday, Judge Alsop made clear he was indeed listening. He wrote, “Through the class comment period and at the October 1 hearing, the undersigned has been struck by the scope of the problem here. The consistency and passion with which the nearly one hundred thirty written commenters, three hundred speaking requests, and the fourteen speakers at the fairness hearing have told their stories leads to the conclusion that their voices are not individual, special cases within the class, but representative of the class’s shared trauma. This is not an attorney-driven case. Class members have a genuine interest; they sought opportunity via higher education only to be deceived by for-profit institutions and, at least in some cases, saddled with crushing debt.”
Judge Alsup then called out Betsy DeVos for summarily rejecting the students’ debt relief applications: “The Secretary’s perfunctory denial notice does not explain the evidence reviewed or the law applied. It provides no analysis. And, the borrower’s path forward rings disturbingly Kafkaesque…. the Secretary has charged out of the gate, issuing perfunctory denial notices utterly devoid of meaningful explanation at a blistering pace…. The form denial, frankly, hangs borrowers out to dry.”
About the testimony of New Yorker Yvette Colon, Alsup asked, “Why did a student who already qualified for relief based on her school’s misconduct under state law not now qualify for relief based on a claim ‘that would give rise to a cause of action against the school under applicable state law,’” a standard that should have offered her relief under the federal statute.
Some of the students had attended now-defunct schools operated by notorious collapsed chains like Corinthian Colleges, Education Management Corporation, and ITT Tech. But others attended schools operated by companies that are still alive and still getting hundreds of millions from taxpayers to enroll new students. One of those companies, which previously operated the Sanford-Brown and Brooks schools, and now runs American Intercontinental University and Colorado Technical Institute, is Perdoceo. That is the same the awful predatory company, formerly called Career Education Corp., where Betsy DeVos’s top two higher education aides, Diane Auer Jones and Robert Eitel, previously worked.
Judge Alsup ruled that the case should move promptly to discovery of factual issues, which will permit the students’ lawyers to take depositions of DeVos Department officials. The decision also means that instead of a settlement, the case could conclude with a decision by Judge Alsup to force the Department to act in a more fair manner on the students’ claims for debt relief. (Or maybe in January the former head of scam Trump University will leave the White House, and we will have a new president and a new Secretary of Education who will stop favoring predatory operators over students and taxpayers.)
Eileen Connor, Legal Director at the Harvard Project on Predatory Student Lending, and one of the attorneys representing the students, said in a statement, “The class members in this case have suffered harm at every turn, but in this court order they are finally seeing a change in the tides after years of waiting for justice. Students came together to speak up for themselves and show the court the massive scope of the trauma they have endured at the hands of the Department of Education, and the courts are listening.”
A DeVos spokesperson, Angela Morabito, responded with a statement again doubting the validity of many student claims: “Just because a claim was filed does not make it valid and eligible for taxpayer-funded relief.”
In addition to the Project on Predatory Student Lending, Housing & Economic Rights Advocates represents the students in this important lawsuit.
In addition to arbitrarily rejecting or failing to act on pending student loan relief claims, the Trump education department under DeVos, Jones, and Eitel has sought to gut the debt relief law with new regulations that render the law useless. Congress sought to overturn the regulations with a bipartisan resolution, but President Trump vetoed the measure. The Project on Predatory Student Lending and state attorneys general have each filed separate lawsuits challenging those Trump-DeVos rules.