On May 5, 2015, the National Consumer Law Center submitted a letter to U.S. Secretary of Education Arne Duncan urging him to provide federal student loan cancellations to Corinthian borrowers without requiring them to individually prove Corinthian state law violations. Given the abundant government evidence that Corinthian engaged in systemic fraud, it makes no sense for the Department to require each borrower find an attorney so he or she can re-prove Corinthian’s fraud. We once again asked the Secretary to use his clear statutory authority to compromise debts (explained in this chart) to grant automatic loan cancellations to Corinthian borrowers.
We must keep the pressure on the Department to do right by the thousands of harmed Corinthian students. Please join us in this demand by signing our Petition now. Sign-ons are due by Tuesday, May 12.
We also asked the Secretary to accurately inform borrowers who attended unscrupulous schools about their potential eligibility for different types of federal debt relief. We attached a response (see Attachment B in our letter) from the Department to an individual student’s “defense to repayment” claim. In this response, the Department incorrectly claimed that it does not have authority to cancel loans for borrowers who attend schools that engage in violations of the law, stating that its role is to “evaluate only whether a school is capable of administering the Department’s student aid programs.”
This is incorrect, as we lay out in this simple debt relief chart of the various types of federal student loan debt relief. This response also highlights the Department’s wrong view that it has no duty to protect students or taxpayers from for-profit school fraud. As we state in our Petition, this is the viewpoint that led the Department to neglect its clear consumer protection role under the Higher Education Act (HEA) leading to the harm of many thousands of Corinthian students.
Our letter also included an example of similar misinformation from a loan servicer, Navient, in response to a request for relief from another borrower. Navient’s response (also included in Attachment B of our letter) also incorrectly stated that the HEA does not provide for discharges of borrowers harmed by school fraud.
These responses raise important questions. Because loan servicers are the only source of information for most borrowers, the Department must ensure that the servicers provide accurate and unbiased information about borrowers’ rights. Otherwise, how will the vast majority of borrowers without attorneys find out about the different options for loan relief? This misinformation is likely preventing many harmed borrowers from accessing desperately needed loan relief to which they are entitled by law.
In addition, if the Department imposes an individual case-by-case defense to repayment process on students, will the Department and its loan servicers administer this process in a fair, efficient, and unbiased manner? So far, the few responses we have seen indicate that the answer is no.
These examples provide additional justification to our demand that the Department provide automatic debt cancellations to Corinthian borrowers. Anything less is unacceptable.