Student Loan Borrowers Left Hanging With Student Loan-Relief Claims

In a recent report published by MarketWatch, since inauguration day through July 31^st, the Department of Education has received over 25,000 borrowers defense claims according to the report published by the agency’s Office of the Inspector General (OIG). Jillian Berman, the author of the MarketWatch report, stated that these applications are for the purpose of discharging federal loans from “borrowers who said they were misled by their schools, which are typically for-profit schools.” These borrowers who filed have now been left hanging with the Trump administrations hold on the processing these claims.

Past Processing Under the Obama Administration

In the report notes, it appears that the Department of Education has only denied two claims and has approved none. This is a far cry from the work that was done under the Obama administration which saw 31,000 claims out of 72,000 approved. However, the OIG has urged the Department to resume processing these claims.

What These Delays Mean for Borrowers

Also listed in the report notes is the concern that this delay can reflect negatively on a borrower’s credit report. Moreover, the simple fact of having the shadow of this loan hanging over borrowers with uncertainty in the resolution of their claims only adds to the difficulty of the situation. Sadly, for-profit colleges in recent years have been known for unethical recruiting practices such as falsifying their data to make them more appealing to prospective students.

The 2015 Movement Against For-Profit Unethical Practices

This recent OIG report has brought the fight against the predatory behaviors of for-profit colleges to the forefront of the current student loan conversation once again. Although student loan borrowers have had this discharge process available to them since the early 90s, only a small portion of the borrowers over the years have filed claims—this changed in 2015.

Corinthian College, a once major for-profit college chain went under after claims were brought forward regarding their false data, which included exaggerated job placement numbers as well as graduations rates. In the wake of Corinthian College’s collapse, hundreds of borrowers came forward to demand the Obama administration to develop discernable procedures for submitting a claim. In 2016, after negotiations with stakeholders, officials finally published borrowers defense regulations, which were supposed to go into effect this year. However, these have since been put on hold as the current administration is forming a new group to reassess these regulations and processes.

Unfortunately, on of the glaring issues that is facing the Department to resume processing claims is staffing. The group as it sat in 2016 included 10 attorneys a director, and 19 contractors from two different companies. This group has now shrunk dramatically to only six people on staff from the two contractors. If the administration is serious about resuming processing of these claims, then the group that is going to be working through thousands of claims will most certainly have to be larger. Until then, it is very unlikely that the department will be able to process these claims in a timely manner after the defense borrower regulations have been established.