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Public Citizen, Project on Predatory Student Lending Challenge Education Department’s Latest Scheme to Deny Student-Loan Relief

WASHINGTON, D.C. – A Trump administration rule that denies loan relief to many students cheated by their schools is deeply flawed and should be overturned, Public Citizen and the Project on Predatory Student Lending told a court today. The groups represent student borrowers in a lawsuit challenging the U.S. Department of Education’s new “partial relief” rule.

The rule sets forth the methodology by which the department decides whether and how much relief to give borrowers who have demonstrated that they were cheated by the schools they attended. Under the rule, most borrowers whose claims are approved receive only partial or no relief on their student-loan debt.

The lead plaintiff, Sammia Pratt, attended a Corinthian-owned Everest school in Florida for accounting, based on the false promise that she would be able to transfer credits to the University of Central Florida. The school induced her to borrow tens of thousands of dollars in federal student loans and promised her job placement and career services that never materialized. In the end, Pratt’s degree hindered, rather than helped, her career development. Despite her detailed borrower defense application laying out these facts, and Corinthian’s long and well-documented history of fraud, the Department of Education informed Pratt in February that it would grant only 10% relief.

“The Department of Education recognizes that I was defrauded by this school, but because of a ridiculous formula, I only get 10% relief. It’s insulting. I have worked hard to succeed despite all the harm that Everest caused to my life and career. I am not looking for a handout. I just want accountability and a process that is fair for everyone,” said Pratt.

The complaint was filed by Public Citizen Litigation Group and the Project on Predatory Student Lending in the U.S. District Court for the District of Columbia on behalf of six former students of for-profit schools. The students seek to represent all borrowers who have had or will have the partial relief rule applied to them and who will receive less than full relief on their claims.

“These students were lied to and cheated by predatory schools, and every dollar of federal student loan money was based on those lies. They have a legal right to cancel every dollar of those loans – not a percentage based on a formula cooked up by the Department of Education,” said Toby Merrill, director of the Project on Predatory Student Lending. “The Department’s earlier partial relief scheme did not stand up in court, and this version is no better.”

“The Department of Education’s rule ignores the actual harm suffered by students who attended predatory schools,” said Adina Rosenbaum, the Public Citizen attorney representing the borrowers. “The formula it relies on bears no relationship to the effect these schools had on their lives.”

Federal law allows students to seek cancellation of their federal student loans if the school they attended misled them. Since taking office, Education Secretary Betsy DeVos has made several failed attempts to block loan cancellation for students. This is the department’s second attempt at devising a “partial relief” methodology that denies most relief to defrauded student borrowers. The Project on Predatory Student Lending challenged the first rule, which was blocked by a federal court in May 2018, after the court concluded that the rule likely violated a federal law called the Privacy Act.

Under the new rule, issued in December 2019, the Department ignores evidence submitted by borrowers about how their schools’ actions harmed them. Instead, it bases its relief determinations solely on a comparison of the median earnings of recent graduates of the borrower’s program to the earnings of recent graduates of other programs the department deems similar. As the complaint explains, although the Department claims that its formula is based on statistics, it ignores basic statistical principles.

About the Project on Predatory Student Lending
Established in 2012, the Project on Predatory Student Lending of the Legal Services Center of Harvard Law School represents former students of the predatory for-profit college industry. Its mission is to litigate to make it legally and financially impossible for the for-profit college industry to cheat students, and to relieve borrowers from fraudulent student loan debt. The Project has brought a wide variety of cases on behalf of former students of for-profit colleges. It has sued the federal Department of Education for its failures to meet its legal obligation to police this industry and stop the perpetration and collection of fraudulent student loan debt.

About Public Citizen Litigation Group
Public Citizen Litigation Group is the litigating arm of Public Citizen, a nonprofit consumer advocacy organization that champions the public interest in the halls of power. Public Citizen defends democracy, resists corporate power and works to ensure that government works for the people. Public Citizen works to protect the rights of consumers to access the courts and to stop rollbacks of important consumer, worker and environmental protections.