Yesterday, the Department of Education’s Office of Inspector General released a 38-page report analyzing Secretary of Education Betsy DeVos’ handling of the Borrower Defense to Repayment program.
Demonstrating that the program has completely stalled under her administration, it urged the Office of Federal Student Aid to resume the review process and create procedures and timelines to make it more efficient.
What is ‘Borrower Defense to Repayment’?
The Obama administration introduced the Borrower Defense to Repayment (BDR) rule as a way to provide debt relief to students defrauded by their school.
The legislation was prompted by the closing of Corinthian Colleges, which left approximately 16,000 students with debt and no degree. Although borrowers have been able to seek loan forgiveness from fraudulent colleges since 1995, BDR makes the application process much easier.
But a few weeks before the updated BDR was set to launch, DeVos announced that the Department of Education was putting the program on pause. Citing a “muddled process” and “significant costs” to taxpayers, she said it needed further review — and was sued over the decision.
How DeVos is handling debt relief for defrauded students
At the time of her announcement, Devos said nearly 16,000 BDR claims were currently being processed and wouldn’t be affected by the pause.
“Promises made to students under the current rule will be promises kept,” she said in a statement on June 14. “Some borrowers should expect to obtain discharges within the next several weeks.”
In late July, however, Department of Education documents revealed that no applications had been processed — and the new Office of the Inspector General (OIG) report confirmed this glacial pace.
In the six months prior to leaving office, the Obama administration forgave nearly 28,000 loans.
In 10 months of the Trump administration, the DOE has received more than 25,000 claims — but hasn’t approved a single one.
The OIG report criticized several aspects of the department’s handling of BDR, including its information system — it uses more than 1,000 spreadsheets to track data — and review process, noting it had reduced the size of its staff from 30 to six.
It said these “weaknesses” could harm borrowers by negatively affecting their credit reports and increasing the amounts they owe. That’s because if the Department of Education denies a borrower’s claim, the borrower is responsible for the interest accumulated while their loan was in forbearance.
As evidenced by the chart above, the Department of Education has flagged nearly 20,000 applications for approval or denial but has failed to notify the borrowers, leaving them in debt relief limbo.
The OIG report recommended that A. Wayne Johnson, chief operating officer for Federal Student Aid, take several steps, including:
- Resuming the review, approval, and discharge processes for qualifying claims
- Resuming consideration of whether additional categories of claims qualify for discharge
- Ensuring consistent documentation of the review process
- Establishing procedures for closing out claims flagged for denial
- Establishing time frames for the entire claims and discharge process as well as controls to make sure they’re followed
In a memo at the end of the report, Johnson agreed with the majority of the report’s findings, saying his department was working to improve the BDR process.
He added that, to protect borrowers, the department had authorized an “interest credit” for those whose claims are denied more than a year after submission and that approval for some Corinthian Colleges claims “is imminent.”
No mention was made of the Department of Education’s tentative plans to offer partial relief — rather than total forgiveness — to some defrauded students.
The response to the OIG report
With the release of the report, DeVos once again came under fire for supporting for-profit colleges rather than borrowers.
“Secretary DeVos needs to stop listening to the for-profit executives she hired and start following the recommendations of the department’s independent watchdog by providing much needed, and legally required, relief to students who were cheated out of their education and savings,” said Senator Patty Murray (D-Wash.), the top-ranking Democrat on the Senate’s education committee, in a statement published by PBS.
However, Liz Hill, the Department of Education’s press secretary, blamed the process created by the previous administration.
“The OIG report confirms the previous administration did not establish an adequate adjudication process for borrower defense claims,” she said in a statement emailed to Student Loan Hero. “Education Secretary Betsy DeVos is working to put a process in place that provides a consistent and reliable way to adjudicate pending borrower defense claims, provide fair relief to defrauded students, and also protect taxpayers.”
What should defrauded students do?
As it has been for many months, the future of BDR remains murky. If you’re struggling with high student loan debt, here are some steps you can take:
- Contact your student loan ombudsman to discuss your options.
- If your school made fraudulent claims or violated state laws, start the BDR process.
- If your loan payments are unaffordable, consider an income-driven repayment plan.
- Look into alternative student loan forgiveness programs.
And if you want the Department of Education to step up its game when it comes to BDR, contact your representatives and urge them to take action.
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