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Student-Loan Debt
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Students Were Promised Loan Forgiveness. Under Trump, They Wait and Worry.

By  Michael Vasquez
May 26, 2017

Students waited for information on federal student-loan forgiveness at an Everest College campus after Corinthian Colleges Inc. announced in 2015 that it was closing all of its remaining campuses. Thousands of students are still waiting for their loans to be discharged.
Christine Armario, AP Images
Students waited for information on federal student-loan forgiveness at an Everest College campus after Corinthian Colleges Inc. announced in 2015 that it was closing all of its remaining campuses. Thousands of students are still waiting for their loans to be discharged.

Two years ago, Dawn Thompson traveled to Washington to pour her heart out.

Ms. Thompson, a former Corinthian Colleges student, met with a roomful of federal officials, including representatives from the U.S. Education Department. She was joined at the time by about a dozen other students who had also enrolled in Corinthian courses — all of whom said their federal debts should be wiped away because the for-profit chain had defrauded them.

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Students waited for information on federal student-loan forgiveness at an Everest College campus after Corinthian Colleges Inc. announced in 2015 that it was closing all of its remaining campuses. Thousands of students are still waiting for their loans to be discharged.
Christine Armario, AP Images
Students waited for information on federal student-loan forgiveness at an Everest College campus after Corinthian Colleges Inc. announced in 2015 that it was closing all of its remaining campuses. Thousands of students are still waiting for their loans to be discharged.

Two years ago, Dawn Thompson traveled to Washington to pour her heart out.

Ms. Thompson, a former Corinthian Colleges student, met with a roomful of federal officials, including representatives from the U.S. Education Department. She was joined at the time by about a dozen other students who had also enrolled in Corinthian courses — all of whom said their federal debts should be wiped away because the for-profit chain had defrauded them.

“It was very emotional,” said Ms. Thompson, who lives in Athens, Ill. “We all told our stories … I was proud in a way to say that I went there, and stood up and represented other people that were in my same situation.”

For Ms. Thompson, the D.C. trip felt like things had turned a corner. By threatening a “debt strike,” of refusing to make their student-loan payments, Ms. Thompson and the other members of the group, known as the “Corinthian 15,” had attracted national media attention. People were listening.

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The Education Department would spend the next year-and-a-half creating a debt-relief process for students who were lured into colleges like Corinthian’s by false promises, unethical recruiters, or phony job-placement statistics. Tens of thousands of students have applied for these discharges.

At that initial meeting, in April 2015, Ms. Thompson recalled that Ted Mitchell, who was then the under secretary of education, didn’t say much, but he seemed to sympathize with the students’ plight.

“You could kind of tell by the look on his face, that, yeah, these people were ripped off,” Ms. Thompson, 51, said.

Ms. Thompson is less optimistic now that Donald J. Trump is president. Her six-figure student loan debt from attending Corinthian’s online programs still hasn’t been discharged, even though she received an email from the Education Department on January 13 stating that her application — known as a “borrower defense to repayment” — had been approved. That email promised that the loan forgiveness “should be completed within the next 60-120 days,” but that deadline came and went.

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As a result, Ms. Thompson’s college education is on hold. She is three classes away from earning her master’s degree at Southern New Hampshire University, a nonprofit institution. But her heavy borrowing while attending a Corinthian college caused her to hit the federal government’s borrowing cap. Until those Corinthian loans are discharged, she can’t take out the loans she needs for those last remaining classes.

‘I Don’t Know How That’s Legal’

Legally speaking, the rules of student-debt relief haven’t changed under the Trump administration. But the delays in processing already-approved claims — combined with Education Secretary Betsy DeVos’s silence on how future claims will be treated — have created an atmosphere of uncertainty.

“We at least had a verbal commitment by the officials in the Obama administration to do right by students,” said Alexis Goldstein, a senior policy analyst at Americans for Financial Reform, a nonprofit group that advocates for stronger consumer protection and tougher Wall Street regulation. Ms. DeVos, Ms. Goldstein said, “has made no commitments about going through the backlog, she has made no commitments about accepting additional applications. I don’t know how that’s legal.”

Ms. DeVos told lawmakers this month that the department will “make good” on its loan-forgiveness promise to students who have already received approval notices. More than 20,000 such notices went out to students in January, just before Mr. Trump took office.

“That is in process,” the education secretary said.

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Ms. DeVos added that the department would have more to say in the coming weeks on the general issue of loan forgiveness for defrauded students.

The Education Department did not respond to a request for further comment.

Earlier this month, a group of five Democratic U.S. senators, including Sens. Dick Durbin of Illinois and Elizabeth Warren of Massachusetts, sent Ms. DeVos a letter pressing for more details about how much progress had been made in discharging the loans of defrauded students. The senators demanded that statistics be provided by the end of the month — such as the number of student claims pending review, broken down by state — and they told the education secretary that “the department must uphold its responsibility to provide relief for the students whose lives were disrupted by fraudulent institutions.”

The director of borrower defense at the Education Department is Colleen Nevin, who joined the agency during the waning months of the Obama administration. Ms. Nevin is a former assistant attorney general in Massachusetts, where the attorney general’s office has worked aggressively to punish for-profit colleges that engage in dishonest tactics. The office, for example, sued Corinthian Colleges in 2014. Since then, the Massachusetts attorney general has been active in trying to secure loan forgiveness for defrauded students from Corinthian and other colleges.

Approving a loan-forgiveness claim, however, is not something that Ms. Nevin can do on her own. David A. Bergeron, a staff member in the Education Department under President Barack Obama, said that borrower-defense claims need to be signed off by various people, including James Manning, acting under secretary of education, the department’s Office of General Counsel, and the White House Office of Management and Budget.

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Mr. Bergeron, a former acting assistant secretary for postsecondary education who left the department in 2013, said he, too, is concerned that students may have a tough time getting loan forgiveness under the new administration. Slowing the pace of loan forgiveness isn’t hard, he said.

“You just take all the staff that has been assigned to do those discharges and reassign them to do something else, and then we won’t see any discharges done,” he said.

A Long-Overlooked Rule

The borrower-defense regulation has been on the books since 1994, but it was largely ignored until the collapse of Corinthian Colleges 20 years later. The rule allows students to dispute their student debt if they can point to “any act or omission of the school” that would be a violation of state law.

The Debt Collective activist group, an offshoot of the Occupy Wall Street movement, was instrumental in organizing Corinthian students, advocating for their rights under borrower defense, and pressuring federal officials to act. The procedures for when and how to grant loan relief were vague in the 1994 rule, so the Obama administration wrote a more-detailed borrower defense regulation, which is set to take effect on July 1.

The version of the rule included some big wins for students, such as prohibiting colleges from inserting mandatory arbitration clauses into their enrollment contracts. But there were other provisions that consumer advocates and state attorneys general asked for and didn’t get. One key clause that didn’t make the cut: allowing attorneys general, state regulators, and legal-aid organizations to refer groups of students to the Education Department for loan relief. That would have allowed classmates from a troubled college or program to ask for loan forgiveness together — potentially speeding up the process while also making it less intimidating for students.

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Instead, the final rule gives the secretary of education or his or her appointee the sole authority to designate groups of eligible students. When objecting to this approach last year, the Debt Collective activists warned that “political winds” could change and negatively affect borrowers. The group argued that informal cooperation between state attorneys general and the department wasn’t enough.

“One shudders to think what it would look like under a President and Secretary who do not seek to maintain a public image of friendliness to student borrowers,” the group wrote.

A former Education Department official from the Obama administration, who spoke on the condition of anonymity, said the power to designate groups of students was kept in-house because the department wanted to examine firsthand any evidence that was collected by an attorney general.

“It just didn’t feel right that we would simply take their word for it,” the official said. “But we developed very good and collaborative relationships with state AGs.”

Whether the Trump administration will be similarly collaborative with states that crack down on for-profit college abuses is unclear. Advocates for students, meanwhile, say they are ready to fight back if the administration doesn’t provide the relief to which borrowers are legally entitled.

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“Am I worried? Yeah, of course I’m worried,” said Toby Merrill, director of Harvard Law School’s Project on Predatory Student Lending. “But do I think that people are without rights? Absolutely not.”

Michael Vasquez is a senior investigative reporter. Follow him on Twitter @MrMikeVasquez, or email him at michael.vasquez@chronicle.com.

A version of this article appeared in the June 9, 2017, issue.
We welcome your thoughts and questions about this article. Please email the editors or submit a letter for publication.
Law & PolicyPolitical Influence & Activism
Michael Vasquez
Michael Vasquez is a senior investigative reporter for The Chronicle. Before joining The Chronicle, he led a team of reporters as education editor for Politico, where he spearheaded the team’s 2016 Campaign coverage of education issues. Mr. Vasquez began his reporting career at The Miami Herald, where he worked for 14 years, covering both politics and education.
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