Peters & Maloney Call for Investigation into Secretary DeVos’ Use of Private Information to Limit Relief for Defrauded Student Borrowers

Jun 16, 2020
Press Release

WASHINGTON, DC – U.S. Senator Gary Peters, Ranking Member of the Homeland Security and Governmental Affairs Committee, and U.S. Representative Carolyn B. Maloney, Chairwoman of the Committee on Oversight and Reform, called for an investigation into reports that Secretary of Education Betsy DeVos may have violated federal privacy laws and undermined legal protections for student borrowers. Peters and Maloney urged the Department of Education Inspector General to investigate allegations that the Secretary DeVos illegally used information from the Social Security Administration to carry out directives that would prevent students defrauded by for-profit colleges from receiving full loan relief. In Michigan, more than 12,000 former students were found to be eligible to file for loan forgiveness under the borrower defense to repayment program that provides relief to students defrauded by for-profit colleges.

 

“We are concerned that under the Trump Administration, the Department has applied a “partial relief” formula that drastically limits the assistance available to students who have been defrauded, typically by for-profit colleges,” the members wrote. “This partial relief formula is arbitrarily short-changing struggling borrowers when they can least afford it. As a result of the coronavirus pandemic, the economy is in free-fall, and millions of Americans are out of work.  Student debt already places significant strains on individual borrowers and the economy as a whole, and in this time of widespread suffering, the Department should be working to provide additional relief to borrowers rather than applying a new formula that limits their relief based on inaccurate assumptions.”

 

Under federal law, student borrowers who have been misled or defrauded by for-profit universities may apply for “borrower defense” to seek forgiveness of student loans used to attend schools that engaged in misconduct. In 2017, Secretary DeVos announced changes to the program, including a new “partial relief” methodology, which would calculate the amount of relief offered to borrowers by analyzing the average earnings of students in the program compared to students who attended other schools. In 2018, a federal judge ruled that the Department had violated the Privacy Act of 1974 when, without the permission of applicants, it accessed data from the Social Security Administration to determine the income levels of more than 61,000 student borrowers. The court ordered a preliminary injunction, suspending use of the partial-relief formula.

 

Late last year, the Department announced a second partial-relief methodology, which also relied on data about borrowers to limit the amount of relief offered to defrauded students. For some programs, the new methodology would require a borrower to make less than $0 in earnings – a mathematical impossibility – in order to receive full relief. Like the previous policy, the new rules would limit many defrauded borrowers to only a small fraction of the debt relief they are seeking.

 

Peters and Maloney expressed concern that the Department’s adoption of partial relief formulas was not only a violation of federal privacy laws, but also underscores Secretary DeVos’ efforts to put the interests of for-profit colleges ahead of the interests of hardworking American students. The members also raised concerns that these actions – which have led to costly, protracted litigation – have diverted significant resources away from Department priorities at a time when the Department should be engaged in several critical initiatives, including the implementation of the CARES Act.

 

Text of the letter is copied below and available here:

Issues: 
116th Congress