The Debt Collective Statement on the Borrower Defense Special Master’s Report on Defense To Repayment

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Today, the Borrower Defense Special Master (BDSM) who was appointed six months ago to review Defense to Repayment claims filed by defrauded college students, issued a report confirming that the Department of Education is still refusing to grant the class-wide relief that law and justice require in cases of widespread fraud.

Corinthian students deserve class-wide discharges immediately.

In the report, “Special Master Joe Smith Delivers Progress Report on Borrower Defense Process,” Smith says that all the Department needs to grant a discharge to any borrower is (1) evidence of widespread wrongdoing at a campus and (2) evidence that the borrower attended the campus during the time or wrongdoing. But after years of investigations, the Department already has evidence of extensive lawbreaking at both Corinthian and EDMC. It also has detailed data on which borrowers attended those campuses and mounting evidence of fraud at other schools, such as ITT and the University of Phoenix.

The law is clear. The Secretary of Education’s authority to cancel debt is clear. Multiple provisions of the Higher Education Act give the Secretary power to cancel loans in the presence of widespread fraud. Thirteen members of Congress, nine state Attorneys General, multiple student advocacy organizations, and thousands of students have reminded Secretary Duncan of his authority over and over again. Yet, the Department has provided no reason--legal or otherwise--that it should not exercise this authority. Instead, it continues to create unnecessary, meanspirited and convoluted barriers to loan relief while students and co-signers are hounded by debt collectors, threatened with garnishment, and unable to enroll in another school or move on with their lives.

So why is the Department drawing out this process indefinitely? Why is it wasting money to hire a squad of lawyers to review each borrower’s claim individually? Why has it failed to grant relief for students with Consolidated or FFEL loans, given that students cannot choose which type of loan they have?

It’s simple. The Department funneled billions of dollars to executives and shareholders of these fraudulent “schools” for over a decade. It now wants to save face by creating a Rube Goldberg-type contraption to prevent as many people as possible from seeking the relief they deserve. The Department is well aware that Corinthian and EDMC are the tip of the iceberg and that providing broad relief will open the floodgates and embolden other defrauded borrowers to come forward.

Consistent with its past actions, the BDSM’s latest report will generate more headlines touting “debt relief” without doing anything about the hundreds of thousands of students who are suffering under the burden of debt that should never have been issued and which the Department refuses to cancel. Secretary Arne Duncan appears to wants the good press associated with announcing that he is providing debt relief and to look like he is holding for-profits accountable, without doing anything to actually help borrowers in need or to turn off the spigot of federal funds to scam schools.

This process purposefully is confusing for other borrowers

For students who did not attend Corinthian, the process of getting loan relief is also entirely unclear. Though it announced that the BDSM would create the guidelines for borrower relief, the Department is conducting an additional drawn-out negotiated rulemaking process for 2016. It has not released any guidance for borrowers on how their claims will be decided or when.

On behalf of defrauded students from Corinthian, ITT Tech, and EDMC we have reached out repeatedly to the Department and to the BDSM requesting a meeting to work on making the process transparent and just for borrowers from all schools. Our request has been repeatedly ignored, suggesting that the Department has no intention of actually meeting with students harmed by its policies despite repeated claims to the contrary.