2 Borrowers Sue Over Forgiveness of Student Loans

Inside Higher Ed

November 13, 2017

Frustrated with the slow resolution of loan forgiveness claims at the Department of Education, two borrowers have filed a lawsuit against Education Secretary Betsy DeVos and loan servicing company Navient in federal court.

The lawsuit, filed Sunday by two former students of the for-profit Sanford-Brown Institute, cites federal and state law in seeking forgiveness of their federal and privately held loans.

Sanford-Brown was owned by the Career Education Corporation chain; it closed in 2015. The borrowers say the college misrepresented its career training program as well as the employment prospects of graduates. Instead of finding gainful employment, they say they were harmed by their attendance and the student loan debt they took out to do so. In addition to violations of law found by state regulators, the lawsuit cites the contract signed by the borrowers with Sanford-Brown in arguing for debt relief.

The Department of Education today will begin a negotiated rule-making process to overhaul the borrower-defense rule issued by the Obama administration last year. The Obama regulation had clarified and expanded the basis for forgiveness of federal loans in cases of fraud or misrepresentation.

While the department has planned the new rule-making process, close to 90,000 pending borrower-defense claims have yet to receive any resolution under the Trump administration.

“People’s rights not to pay for defective products [are] well established in law, so whatever the Department of Education is or is not doing, the legal rights of borrowers continue to exist and are enforceable against the government just as they are against private parties,” Toby Merrill, a lawyer with Harvard University’s Project on Predatory Student Lending, which is representing the borrowers, told the Associated Press.