Student Debt Strikers Call Fed's Loan Forgiveness Plan a Bureaucratic Sham

Secretary of Education Arne Duncan said on Monday that "You'd have to be made of stone not to feel for these students," but critics of the new plan say the DOE's new plan simply adds unnecessary bureaucratic barriers to a policy of loan forgiveness that could be much easier. (Photo: Jacquelyn Martin/Associated Press)

Student Debt Strikers Call Fed's Loan Forgiveness Plan a Bureaucratic Sham

With the federal goverment continuing to profit from high-priced college loans, critics of DOE's new plan say there's an easier and more just approach to debt forgiveness

Despite a new announcement by the U.S. Department of Education that it will begin a process of debt-forgiveness for students cheated into high-priced loans by predatory for-profit colleges, one of the groups most responsible for lobbying to have the debts erased is reacting bitterly, saying the plan is more complicated than it needs to be and that those already victimized by one government-backed scheme should not be put through the ringer for a second time.

"The legal and most painless possible process for students is no process. [...] An automatic, class-wide discharge for defrauded Corinthian students would not cost taxpayers, as it would be offset by government profits on the student loan program."

On Monday, Education Secretary Arne Duncan announced that ten of thousands of students who attended institutions operated by Corinthian Colleges Inc.--which, before recently going bankrupt, ran hundreds of schools under the names of Heald, WyoTech and Everest colleges--would be eligible to apply for debt forgiveness as part of the new plan.

As part of the announcement, Secretary Duncan said he would "hold schools accountable for practices that undercut their students and taxpayers." And he added, "Where students have been harmed by fraudulent practices, I am fully committed to making sure students receive every penny of relief they are entitled to under law. We will make this process as easy as possible for them, including by considering claims in groups wherever possible, and hold institutions accountable."

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As the Associated Pressreports:

Corinthian Colleges was one of the largest chains of for-profit colleges when it nearly collapsed last year and became a symbol of fraud in the world of higher education and student loans. According to investigators, Corinthian schools charged exorbitant fees, lied about job prospects for their graduates and, in some cases, encouraged students to lie about their circumstances to get more federal aid.

In a plan orchestrated by the Department of Education, some of the Corinthian schools closed while others were sold before the chain filed for bankruptcy protection this spring. The biggest question has been what should happen to the debt incurred by students whose schools were sold. The law already provides for debt relief for students of schools that close, so long as they apply within 120 days.

The latest plan expands debt relief to students who attended a now-closed school as far back as a year ago. And it streamlines the process for students whose schools were sold but believe they were victims of fraud. The Education Department will soon appoint a "special master" to oversee much of the program, and support students at other for-profit schools who feel they've been victimized.

The DOE released a fact sheet to explain the new program and answer questions for students curious about whether or not they will be eligible for the loan-forgiveness program. But the fact sheet itself, a lengthy and complicated document, was already raising the alarm for student debt activists who appeared unconvinced that Duncan's new plan will deliver on its "as easy as possible" promises.

In response to the plan announced by Duncan, the group Strike Debt--which made international headlines by bringing together Corinthian students who vowed publicly that they would not repay loans they considered fraudulent--said forgiveness of their debt need not be so complicated. Furthermore, they challenged the idea, made in much of the mainstream reporting on the plan, that it would somehow "cost taxpayers" to nullify their loans.

In a statement, the group said:

How many times do Corinthian students have to be lied to?

Just as Corinthian Colleges portrayed its programs as a path to a better life when they were in fact debt traps, the Department of Education is portraying a process that re-victimizes students as a solution to a problem they created.

If Education Secretary Arne Duncan was truly "committed to making sure students receive every penny of relief they are entitled to under law" he would sign the "Order for Discharge of Federal Student Loan Debts" the Debt Collective sent him last week, immediately and automatically discharging Corinthian students' debts. Students are entitled to receive full relief under law. The legal and most painless possible process for students is no process--they deserve an automatic discharge of their debts.

The Department of Education has been misusing taxpayer dollars for decades, funding up to 90% of Corinthian and other exploitative for-profit college chains. Hundreds of thousands of students were led into a debt trap funded by tax dollars. Automatic, class-wide discharges are not only just, they would also serve as a corrective for the Department's flagrant failures to allocate public funds wisely. An automatic, class-wide discharge for defrauded Corinthian students would not cost taxpayers, as it would be offset by government profits on the student loan program.

In place of this obvious option, the Department of Education's "solution" is a bureaucratically tortured process designed to provide relief only to those who hear about it and can figure out how to navigate unnecessary red tape.

In response to government inaction in the face of systemic corruption, 1,233 people from across the county who attended a variety of schools (for-profit, public, and private non-profit institutions) have pledged to stand in solidarity with Corinthian students and strike their own student loans should Department of Education continue to fail to meet its moral and legal responsibilities.

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