What’s Wrong with the Obama Administration’s Plan to Help Student Debtors
The public has until Aug. 1 to weigh in on the Department of Education's proposed new regulations.
As the general-election campaign gets underway, one of the issues candidates for the White House and Congress should be debating is what to do about the $1.3 trillion student debt burden.
The struggle for the rights of students to have their loans discharged in cases of fraud has reached an important milestone. This month, the Department of Education released a draft of its proposal. The public has until Aug. 1 to make its voice heard.
To be fair, I will say that there are some good things about the draft, including a provision to eliminate federal funding for schools that require students to sign arbitration clauses that make it impossible for them to sue their schools. However, there are some areas in the proposal that are of great concern.
I am an expert witness.
After many years of being successfully employed (one of my last positions was as the marketing assistant for an aircraft company), I ended up on disability in my 50s. I had seen commercials for Everest University Online, a branch of for-profit Corinthian College. I thought this could be a possible route to getting my life back.
After attending Everest for three years starting in 2011, I owe more than $53,000 for an associate’s degree in business marketing and one year of coursework toward my bachelor’s degree. It wasn’t until fall of 2014, my last term, that I found out my school had been investigated and sued for fraud years before I enrolled. I felt that it was wrong for the US Department of Education not to notify me of the investigations so that I could reconsider my choice of school.
I had to come to terms with the fact that I had wasted three years of my life for a sub-par education and a degree that was not recognized by potential employers. I also found out that I was barred from suing the school because I had signed something called an arbitration agreement (or what I like to call a “ripoff clause”) from a fellow student. The entire enrollment process had taken place online and it was so rushed and filled with urgency that I was not allowed time to read anything. I was told, “click here, click there, classes are starting and we need to get this paperwork out of the way so that you can begin.” I had no idea that I was signing my rights away!
My anger wasn’t just about the money. I missed out on so many family and life events while taking classes. Looking back, I realized how much the school had taken from me, including denying me a leave of absence to mourn when my youngest son committed suicide.
Refusing to give up, I joined a Facebook group where I began organizing with fellow for-profit college students. With help from an organization called the Debt Collective, 15 of us launched the nation’s first-ever student debt strike last year. (We now number in the thousands, including students from other for-profit schools.) In addition to refusing to pay our loans, we demanded that the Department of Education cancel them, something we believe the department has the power to do under a law called Defense to Repayment. According to the department’s own guidance, this provision could allow students who are defrauded by their schools to have their debts cancelled.
Earlier this year, I represented students at a series of meetings in Washington, where the department, borrower advocates and representatives from schools — including the for-profit industry — met to debate how to implement the law. At one of the first sessions, I got a sense of how the federal government views students like me who come from low-income backgrounds. One of the representatives from the department referred to former students as “conniving” — insinuating that people trying to avail themselves of their rights under the law were trying to get something for nothing. I was repulsed by this comment made by a public servant, especially considering how much damage for-profit colleges have already caused.
Despite the denigration, I am continuing the fight for myself and for my fellow students.
In the Department of Education’s current draft proposal, I’m concerned that borrowers who have loans via the Federal Family Education Loan (FFEL) program face unfair hurdles. Under the FFEL program, federal loans were issued by banks and guaranteed by the Department of Education — a practice that ended in 2010. The department does not want to forgive these loans because they are owned by outside lenders. This is arbitrary and unjust; students were not given a choice regarding the type of loan they received, and a FFEL loan is still a federal student loan.
Creating even more complications for FFEL borrowers, the department had made the process dependent upon consolidation to direct loans (loans issued directly by the Department of Education); there is no way for FFEL borrowers to get their loans cancelled as a group. This means they will have to apply individually for relief (a confusing and overwhelming process) even when there is evidence of harm to a large swath of students. The department is doing all it can to avoid providing relief to FFEL borrowers who account for almost half of all debtors.
FFEL is not the only weak area in the department’s proposal. The process for relief that is in effect now for Corinthian students is too narrow. The Education Department is limiting debt cancellation to students who attended Corinthian between 2010 and 2014, and only those students enrolled in certain programs are eligible. While this might make sense to bureaucrats in Washington, it makes no sense to scammed borrowers. All Corinthian students were affected by the school’s fraudulent actions and the school’s crimes are widely known.
As for me, the Department of Education is limiting relief in so many ways that I am having a hard time trusting the agency. As students, we put our faith in our government to protect us from fraudulent schools, but we were fed to the wolves and left with no path to recoup what was taken from us.
To add insult to injury, the department has proposed leaving the enforcement of all of these new regulations to the “discretion of the Secretary [of Education],” which means that no states attorneys general, legal aid attorneys or other advocates would have the power to assure defrauded students get relief. Why should students trust the government to do the right thing? Personally, I follow the old adage, “once bitten, twice shy.” I have no reason to trust the Department of Education to do what is right. After more than a year of fighting, I still owe approximately $53,000 in student loans and my Pell Grant is gone, so going back to school is not an option for me.
But I am just one student among thousands, some of whom have two or three times more debt than I, and those numbers have given us strength. I believe that the Debt Collective, by helping students like me to make our voices heard, pressured the department to finally begin to follow the law. With my fellow for-profit college students across the country, I’ve learned a lot about the power of protest and of collective action over the last two years. The fight goes on, and we won’t give up until we win!
(This story has been supported by the journalism nonprofit Economic Hardship Reporting Project.)