Former Education Secretary Betsy Devos (Photo by John Lamparski/Getty Images)
In the latest news on student loan cancellation, Betsy DeVos must explain why 160,000 student loan borrowers were rejected for student loan forgiveness.
Here’s what you need to know — and what it means for your student loans.
Student Loans
DeVos, the former U.S. Secretary of Education under President Donald Trump, must testify in federal court about why so many student loan borrowers have been rejected for student loan forgiveness. As first reported by Politico, Judge William Alsup wrote that “exceptional circumstances” warrant requiring DeVos to appear for a three-hour deposition, even though both DeVos and the Biden administration opposed that effort. According to the lawsuit, DeVos allegedly had personal involvement in pausing student loan forgiveness for defrauded student loan borrowers for 18 months, and then dismissed their claims for student loan forgiveness with little to no explanation. The judge wrote that he wants to understand DeVos’s rationale for such actions.
Approximately 160,000 student loan borrowers filed a federal lawsuit claiming they were incorrectly denied student loan forgiveness from the Education Department. (The court’s decision comes at a time when federal student loan borrowers are expected to get $90 billion of student loan forgiveness through September 30, 2021 as a result of the Covid-19 pandemic). The student loan borrowers in this lawsuit are seeking student loan cancellation under borrower defense to repayment, which allows student loan borrowers to get student loan cancellation if they were defrauded by their school or their school closed, for example. During her tenure, DeVos and the Education Department were sued several times regarding student loan forgiveness. Among the allegations:
- 130,000 claims for student loan forgiveness were denied in DeVos’ final year in office (compared to 9,000 rejections in the preceding five years);
- The Education Department sought to process 5,000 student loan forgiveness claims per week;
- Education Department reviewers often reviewed and reached a decision on an application for student loan cancellation in 12 minutes or less;
- Reviewers who processed claims for student loan forgiveness faster were awarded bonuses, while slower reviewers were fired;
- 91,000 applications for student loan cancellation were rejected with little to no explanation;
- 95% of student loan borrowers who applied for student loan cancellation were rejected;
- Most, if not all, borrowers whose applications were approved got student loan cancellation only because of prior student loan forgiveness rules from the Obama administration.
DeVos opposes student loan forgiveness
As Education Secretary, DeVos opposed student loan forgiveness for the most part, and also opposed wide-scale student loan cancellation for student loan borrowers. Why? DeVos said she wanted to strike a balance between the needs and interests of both taxpayers and student loan borrowers. DeVos claimed that the borrower defense to repayment rules, which were set up under the Obama administration, cost taxpayers billions of dollars.
Student loan forgiveness: the DeVos plan
- Under her revised rules for borrower defense to repayment, DeVos said she would save taxpayers $11 billion over 10 years.
- DeVos required student loan borrowers who sought to claim borrower defense to apply for student loan cancellation (rather than making it automatic).
- DeVos also included a three-year statute of limitations on student loan cancellation for borrowers to prove they were harmed financially.
Biden cancels $2.3 billion of student loans
President Joe Biden wants to cancel student loans three ways. Biden has moved aggressively to cancel student loans, including for borrower defense to repayment. For example, Biden has cancelled at least $2.3 billion of student loans since becoming president. (You can find out here if you qualify for this student loan cancellation). First, Biden cancelled $1 billion of student loans for 72,000 student loan borrowers and second, he cancelled another $1.3 billion of student loans for 41,000 borrowers with total and permanent disability. America has reacted to Biden’s student loan cancellation in different ways. That said, the $1 billion of student loan cancellation specifically provided student loan relief to student loan borrowers who got partial student loan forgiveness during the Trump administration. Biden gave these 72,000 full student loan cancellation due to borrower defense to repayment. Biden’s efforts to cancel student loans for specific groups of student loan borrowers are examples of what may be many changes to student loans in the coming years. However, there are at least 5 signs that Biden won’t enact wide-scale student loan cancellation.
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