Betsy Devos' refusal to honor student loan forgiveness shows her disrespect for the law

Most people smacked down by the courts as much as the education secretary might stop flouting the law. She looks for new ways around complying with it.
Image: Education Secretary Devos attends signing ceremony at the White House in Washington
Education Secretary Betsy Devos at the White House on July 9, 2020.Kevin Lamarque / Reuters
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By Alexis Goldstein, senior policy analyst, Americans for Financial Reform

Even in a government full of people without the integrity, will or courage to do the right thing, most of the agencies stand down — or at least pretend to — when ordered by the courts. But not the Department of Education under Secretary Betsy DeVos, who seems to have been only further animated by her losses in court over her efforts to deny the rightful debt cancellations owed to people who attended predatory, for-profit colleges, borrowers who are disproportionately women and people of color, and often now working in front-line jobs.

First, DeVos tried to delay an Obama-era update to Borrower Defense to Repayment rules — a 1990s-era regulation that says that, if a school violates state law, borrowers are entitled to cancellation of their federal student loans. The Obama administration’s update included new protections like forbidding schools from preventing students from suing in class-action lawsuits. A judge found DeVos’ delay to this rule “unlawful” and “arbitrary and capricious.”

She has also failed to cancel the debts of tens of thousands of borrowers the government already deemed entitled to relief. Another lawsuit challenged this failure, and the court ordered DeVos to halt debt collection for any borrowers covered by the lawsuit; 16,000 students and parents were collected from anyway. So DeVos was held in contempt of court and the department was fined $100,000.

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In a stunning display of their ongoing lawlessness, the department then found yet another 17,258 borrowers it had illegally collected on after the ruling.

DeVos’ legal troubles didn’t stop there. Massachusetts Attorney General Maura Healey had previously applied to the department on behalf of 7,200 former students of Corinthian Colleges in the state, saying their debts were unlawful and therefore uncollectable. In 2018, a court found DeVos had illegally seized the tax refund of two Massachusetts borrowers, given that they had open applications for debt cancellation. But DeVos kept on illegally seizing other Massachusetts borrowers' tax refunds even after this ruling, leading to yet another lawsuit.

This June, the same judge who found DeVos’ actions illegal in 2018 ordered her to cancel the debts of all 7,200 former Corinthian Colleges students in Massachusetts.

A string of legal defeats like this might give a department head pause. Instead, it’s been full speed ahead for DeVos.

She rewrote the Borrower Defense regulations so dramatically that almost no borrower will ever qualify for debt cancellation again; the department itself estimated that only about 3 cents of every dollar borrowed will be forgiven under the DeVos rule. Her rewrite was so drastic that 10 Republican senators joined the Democrats to vote to overturn her rewrite this March and Trump’s veto kept DeVos’ rewrite in place.

And now, the department is trying a particularly cruel and Orwellian sleight of hand — denying debt cancellations without admitting they are doing so. They are writing to tens of thousands of defrauded borrowers that their claims have been approved, but because there’s no evidence they were harmed, the amount of debt relief is zero dollars.

But perhaps that’s to be expected: DeVos, of course, had stacked her department with former executives of for-profit colleges, like Robert Eitel and Diane Auer Jones, both formerly of the for-profit college chain Career Education Corp.

And, when she was once forced to process debt cancellations previously approved by the Obama administration, she took the time to write a comment at the bottom of the form, noting she was approving the cancellations “with extreme displeasure.”

The department’s refusal to comply with the rule of law has pushed the courts toward bigger, broader, more punitive rulings than courts usually enter against federal agencies.Her obstinance is wasting government resources in service of denying discharges to Black and Latinx borrowers hit hard by the last crisis — and now harder by the pandemic.

As a result of the 2008 financial crisis and the Great Recession, Black wealth fell by more than half, and Latinx wealth fell by 66 percent. These communities were then targeted a second time, as for-profit colleges swooped into this devastation, holding out false promises and falsifying job placement statistics to entice people in hard-hit communities to enroll in their schools. Fraud was endemic at these institutions (as evidenced by the cascade of lawsuits and investigations they have faced), which is part of the reason that for-profit college graduates typically make less after graduating than they did before. These are the same scammed students DeVos has claimed were simply looking for “free money.”

But the targeting had worked: Black women made up 26 percent of enrollees at the for-profit giant Corinthian prior to its collapse into bankruptcy. In Massachusetts, at two Corinthian Schools, 80 percent of students were women and 75 percent were Black or Latinx.

So during the Obama Administration, thousands of former students of for-profit colleges organized with a group called The Debt Collective and sought their right to debt cancellation under those 90s-era Borrower Defense rules. Borrowers pointed to lawsuits and investigations — such as the Department of Education’s own enforcement actions against the for-profit giant Corinthian, which collapsed into bankruptcy in 2015 following evidence of widespread wrongdoing — as proof that they, and by virtue of that fact, the government had been defrauded.

The Obama administration, however, rejected calls by borrowers and advocates alike to cancel these debts in bulk; one borrower, Pamela Hunt, even recorded a video message to President Barack Obama, asking him to cancel borrowers’ debts en masse before leaving office. But they instead put in place a process to decide, claim by claim, who would receive debt cancellation. This left the many borrowers with undecided claims uniquely vulnerable to a DeVos-led department that has been aggressively defiant of both borrower’s rights and of the courts.

The consequence now is that too many students who were defrauded by for-profit schools that are totally dependent on federal dollars are still suffering with unfair and unmanageable debts, and relying on a Cabinet member who doesn’t think the law applies to her.

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