Senate Rejects DeVos Rule Restricting Debt Relief for Bilked Students

Student Debt

Senate Rejects DeVos Rule Restricting Debt Relief for Bilked Students

Student Debt | The New York Times | Erica L. Green and Stacy Cowley | March 11, 2020

Student Debt: Senate struck down Education Department rule by Secretary Betsy DeVos

WASHINGTON — In a bipartisan rebuke, the Senate voted Wednesday to overturn a major Trump administration rule that would sharply limit debt relief for students misled by schools that lured them in with false claims about their graduates’ career and earning prospects.

In a 53-42 vote that included 10 Republicans, the Senate easily struck down a revised Education Department rule finalized in September by Education Secretary Betsy DeVos. The House passed a companion resolution in January. The legislation will now go to President Trump, who will decide whether to uphold the rule with a veto or side with Congress over his own education secretary.

He has told Senate Republicans he is “neutral” on repealing the rule, though he has yet to comment on his veto intentions.

Ms. DeVos’s rule was one of several efforts to rewrite Obama-era debt relief measures, which allow students who attended schools that committed serious fraud to request that their loan debts be forgiven. Ms. DeVos’s changes raised the bar for borrowers’ relief claims, requiring applicants to individually prove that a school knowingly misled them and that they were financially harmed by the deception. It also set a three-year deadline on claims.

In a statement, the Education Department said its rule protected community colleges, historically black colleges and universities, and taxpayers “from undue harm from the poorly written Obama-era regulation.”

Changes would effectively kill debt relief measures

Critics said those changes would effectively kill the program by imposing requirements that almost no borrowers would be able to meet. Democrats emphasized the harm from the rule to veterans bilked out of G.I. Bill benefits, a critical move that brought on Republicans.

Ms. DeVos’s changes “made it extremely difficult for these students to get any relief,” Senator Richard J. Durbin, Democrat of Illinois and the minority whip, who led the effort in the Senate, said on Wednesday. “The students are up in arms over it, and I’m joining them.”

A policy statement issued by the Trump administration in February defended Ms. DeVos’s rule as a change that “restores due process, the rule of law, and student choice,” and said that the president’s advisers “would recommend that he veto” attempts to overturn it.

The Senate action poses a political quandary for Mr. Trump. He has pressed the Education Department for a proposal to match sweeping college debt plans proposed by Democratic presidential candidates. And veterans, who backed the Senate measure, have been key political supporters.

Last year, Mr. Trump announced that he would forgive loan debt for permanently disabled veterans, which he said ensured that “our wounded warriors are not saddled with mountains of student debt.”

Democratic leaders have also noted that Mr. Trump’s own for-profit college venture, Trump University, had to settle fraud claims.

“He had to pay $25 million for ripping off the kids,” Senator Chuck Schumer of New York, the Democratic leader, said at a recent news conference. “But many of these institutions have done even worse. Students cheated by the for-profit schools deserve the same support that those who went to Trump University have gotten.”

So far, the Education Department has approved 51,000 loan-relief applications — nearly all of them during the Obama administration — and eliminated some $535 million in debt. About 170,000 applications still await a decision.

Judge ruled that the Education Department broke privacy laws

Ms. DeVos had denounced the debt-relief system as a “free money” giveaway, and sought repeatedly to curtail it. Her first attempt was blocked in 2018, after a federal judge ruled that the Education Department broke privacy laws by illegally obtaining information from the Social Security Administration on individual borrowers’ earnings.

The rule change she finalized last year is scheduled to take effect in July. In December, Ms. DeVos’s department added further restrictions, adopting a complicated formula for calculating relief that limits nearly all applicants to only partial relief and requires the majority to repay most of their loans.

In a speech on the Senate floor Tuesday, Mr. Durbin shared two stories of veterans who were misled by their schools, including one who has been waiting years for his debt relief application to be approved by the Education Department. Afterward, 10 Republicans voted to advance the resolution to a final vote.

“All of us have said how much these veterans and their families mean to us,” Mr. Durbin said. “I’m urging my colleagues to show America that when it comes to supporting our veterans, the Senate, on a bipartisan basis, can come together and do the right thing.”

DeVos’s rule also bars most students from suing their schools

One key Republican lawmaker criticized the Senate measure. Senator Lamar Alexander, Republican of Tennessee and the chairman of the Senate’s education committee, said the Obama-era rule went too far, and that Ms. DeVos’s rule restored the original intent of the law.

“If your car is a lemon, you don’t sue the bank — you sue the dealer,” Alexander said on Tuesday in a floor speech. “A college can be a lemon just like a car can be. But unlike a car, if your college is a lemon, you do sue the bank — which is really the taxpayer.”

Mr. Durbin on Wednesday responded to Mr. Alexander’s comments by pointing out that Ms. DeVos’s rule also bars most students from suing their schools.

Veterans have long been considered among the most vulnerable groups for predatory recruitment tactics because of their lucrative G.I. Bill benefits. The benefits are particularly attractive to for-profit schools, because federal law requires those schools to obtain at least 10 percent of their revenue from sources other than Education Department-backed student loans. G.I. Bill benefits help schools meet that quota.

Standing alongside Democratic lawmakers at a news conference last month, seven organizations representing veterans and their families called on Congress to overturn Ms. DeVos’s rule.

John Kamin, assistant director of the veterans employment and education division at the American Legion, said the measure would protect veterans from “lucrative scams.”

“It’s a fact that they are often singled out and targeted with deceptive, fraudulent and predatory college recruiting practices,” Mr. Kamin said. “This rule is not a pathway to relief for student veterans, it is a wall to it.”

“Veterans had a target on their backs when they were in uniform, there’s no need to have one again when they go to college,” said James Haynes, federal policy manager at Veterans Education Success. “These veterans need borrower defense. They need their government to stand up for them just as they stood up to serve our country. The 2016 rule did just that.”

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