Dept. Of Education Hasn’t Approved A Loan Forgiveness Claim In Six Months

When Education Secretary Betsy DeVos hit “reset” on revamped Borrower Defense rules that aim to ensure students at troubled schools weren’t left with nothing but debt if their college collapsed, she noted that students who had already submitted claims for loan forgiveness wouldn’t be affected. But that doesn’t appear to be the case, as the Dept. hasn’t approved a single application in nearly six months. 

In a letter [PDF] to Illinois Sen. Dick Durbin, acting undersecretary of education James Manning details the current status of the borrower defense application review and approval process, admitting that no applications have been approved since Jan. 20.

Under the borrower defense program, a student’s federal education loans can be forgiven if they can prove their college used deceptive practices to convince them to enroll.

Just Waiting

The letter, which was sent in response to Durbin and other lawmakers’ request for information sent in May, revealed that more than 65,100 borrower defense applications — 14,949 of which were submitted since Jan. 20 — are currently pending.

Of these applications, 45,092 are associated with students who attended defunct Corinthian College schools and 7,186 belong to those who attended the also-closed ITT Technical schools.

The next three largest sources of borrower defense claims were associated with Education Management Corporation (EDMC) schools with 2,175 claims; DeVry University, with 1,872 claims; and University of Phoenix operator Apollo Group, with 1,306 claims.

These claims represent approximately $143.2 million in student loans, including unpaid interest, Manning notes.

Facing Repayment

While many of the borrowers who have applied for borrower defense discharges aren’t currently paying on their loans, as they were put into forbearance, that won’t last forever.

Under forbearance, a borrower can postpone their payments and keep their loan from going into default. While this can be extended, those extensions aren’t indefinite.

In fact, Manning notes that about 31,000 borrowers who are awaiting discharge approval could enter repayment on their loans if forbearance isn’t extended.

So far, 50 borrowers have had forbearance expire while waiting for approval.

Approved But No Help

As lawmakers and state Attorneys General have pointed out in the past, many students who submitted claims for borrower defense have actually been approved. Despite this, their loans have yet to been discharged.

Back in May, lawmakers claimed that while the 23,000 students were notified in January that their Borrower Defense claims had been approved and they would receive discharges and refunds within 60 days and 120 days.

Despite this, the senators contended that they had received reports that many previously approved students had not obtained the relief they were promised within 120 days.

As a result, the senators claimed that these borrowers are being billed for unnecessary principal, interest, and even collection fees that they wouldn’t owe had the Dept. provided their discharge.

According to Manning’s update, the outstanding interest for borrower whose claims are approved but not yet discharged totals to about $6.8 million.

Have you submitted a borrower defense claim with the Dept. of Education? We want to hear about your experience: what was the process like? are you still waiting on a refund? Share you story by emailing Consumerist at tips@consumerist.com with the subject “Borrower Defense.”

by Ashlee Kieler via Consumerist