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A class action lawsuit filed in California Tuesday claims the U.S. Department of Education is "intentionally" not processing debt relief claims by students who were defrauded by for-profit colleges.
"They don't have any timetable to resolve these claims and it's pretty clear that they don't have any intention to," said Eileen Connor, legal director for the Project on Predatory Student Lending at the Legal Services Center at Harvard Law School, which brought the suit with the California-based legal service organization Housing and Economic Rights Advocates.
The suit names seven plaintiffs, including two from Massachusetts, who filed for debt relief under the so-called "borrower defense" rule. It allows borrowers to request federal loan forgiveness if their school was found to be fraudulent. The suit claims the department has not processed a single claim since June 2018, leaving more than 160,000 borrowers in financial limbo.
A spokesman for the Department of Education initially refused comment Tuesday, but issued a statement from press secretary Liz Hill on Wednesday.
“The only thing stopping the Department from finalizing thousands of these claims is the constant stream of litigation brought by ideological, so-called student advocate special interests," Hill's statement said. It went on to say, “We have a responsibility to the taxpayer to ensure that claims are properly substantiated so that students receive the relief to which they are entitled.”
At a congressional hearing in May, the department's principal deputy undersecretary, Diane Auer Jones, testified that the backlog was due to a 2018 federal court ruling that blocked the administration's methodology for calculating how much debt should be forgiven for each student.
Connor said the delays are devastating for the students.
"Every day that goes by they're being harmed even more. They can't engage in normal financial transactions. Their credit is ruined," she said. "They're not able to pursue actual education that will give them job training ... because of these bad student loan debts."
The two Massachusetts women among the named plaintiffs are 35-year-old Jessica Jacobson of Lunenberg and 37-year-old Chenelle Archibald of Worcester.
According to the suit, Jacobson completed a media arts and animation program at the New England Institute of Art in Brookline in 2008. The school stopped enrolling students in 2015, and Jacobson filed a "borrower defense" claim to relieve approximately $25,000 in federal loans.
The Department of Education has not ruled on Jacobson's case. The suit says her credit has been "destroyed" and her federal loans have grown to more than $35,000. (The U.S. Department of Justice reached a $95.5 million global settlement agreement with the school's parent company, Education Management Corporation, in 2015 over consumer fraud and other allegations.)
Archibald graduated from Salter College, a two-year college in West Boylston, in 2010. She borrowed over $20,000 in federal loans, and has struggled to pay them back. The suit said she "cannot financially plan for her future because of the uncertainty of her debt" and that getting a car loan was a challenge. (The Massachusetts attorney general reached a $3.75 million agreement with Salter's parent company, Premier Education Group, in 2014 over misrepresentations to enrolling students.)
"They aren't asking for a handout. They aren't asking for a policy change," Connor said of the plaintiffs. "They're asking for the current law to be followed with respect to their student loans."
This post has been updated with a statement from the U.S. Department of Education, which was provided on Wednesday, after publication.
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