Borrower defense releases delayed – The Washington Post



Email has been a godsend for Chris H. Caton.

After four years of waiting, the Department of Education has acknowledged that he was defrauded by WyoTech, a vocational school owned by Corinthian Colleges, and was entitled to full forgiveness of his federal student loans.

The news couldn’t come at a better time. After a stint of homelessness, Caton, 37, had a thriving business making street canes, earning enough money to catch up on bills and save for his own home. But mortgage lenders were nervous about student loan defaults on his credit report, he recalls, and said the $18,000 he still owed made his debt-to-income ratio too high.

Caton thought the release would reduce this ratio and remove the negative mark on his credit. Little did he know he’d be waiting more than a year later for the loans to be erased.

“This email was dated September 7, 2021,” said Caton, who lives in Colorado. “Every time I call the Ministry of Education for an update, I get the bypass. No one has answers. The stain of this loan is holding me back.

Since taking office, the Biden administration has approved $14.5 billion in student loan releases for nearly 1.1 million borrowers defrauded by their colleges. Yet only 53,000 of these former students have actually had their debts cleared to date, according to Department for Education data.

“At this rate, it will take the department 40 years – until the 2060s – to provide full relief to students, said Libby DeBlasio Webster, senior counsel for the National Student Legal Defense Network. “By then many of these students will have children and grandchildren of their own.”

The Biden administration inherited dozens of petitions from for-profit school alumni asking the department to forgive their debt under a law known as the “borrower’s defense of repayment.” Claims have piled up at the department amid a series of college closings and efforts by the Trump administration to delay and limit loan forgiveness.

Education Secretary Miguel Cardona ended Trump-era policies and began clearing the backlog. The efforts resumed this year with the announcement of five sweeping group releases, including the automatic cancellation of loans held by former students from the former for-profit chains Corinthian Colleges and ITT Technical Institutes.

But the Biden administration traded a problem for another. According to five people familiar with the subject.

The problem is twofold: it took months for the department’s federal student aid office to create a system for canceling large batches of loans. And some student loan service companies, which are responsible for servicing the debt, have also been delayed in implementing the process.

As the Biden administration launched a series of ambitious debt relief programs, education staff Departments and service companies have had to turn to new projects and exert effort to manage rejections, according to the people, who spoke on condition of anonymity because they were not authorized to speak publicly.

Scott Buchanan, executive director of the Student Loan Servicing Alliance business group, said the delays were inevitable and predictable.

“Last year, the administration announced about half a dozen massive, unanticipated new programs and they have been steadily and unexpectedly redefining everyone’s work efforts every time there’s a new press release.” , Buchanan said. “Since Congress has never provided funding for these new programs, everyone at the FSA and the departments are working together to move limited staff and IT resources to the administration’s current priority.”

Education Undersecretary James Kvaal told the Washington Post in an email that the department was “working diligently to reinvigorate a borrower advocacy process after the previous administration failed to approve a single set of new discoveries over their entire tenure”.

He pointed out that the Biden administration has approved the most claims of any administration and has increased oversight of colleges and universities to root out fraud and misconduct.

Because people with defense claims are placed in administrative forbearance during the process, there is no demand that they make payments on loans slated for cancellation. Still, borrowers looking to buy a car or refinance a mortgage may struggle to secure favorable terms with high debt-to-equity ratios because the loans sit on their balance sheets.

More than anything, people became frustrated with the department’s lack of communication. The agency kept many borrowers in the dark about their cancellation eligibility long after it publicly announced the approvals.

When the Department of Education pledged in June to forgive the $5.8 billion debt owed by 560,000 former Corinthian students, Kevin Post, 54, said he contacted the agency the same day and had been told to expect an e-mail regarding the current discharge in a few weeks. Five months later, this notice ultimately arrived Thursday. He first submitted a request for relief for the defense in 2018.

Post is among 750,000 people told by the department last week that they have been approved for a borrower’s defense release based on evidence of fraud at beauty schools Corinthian, ITT Tech and Marinello. campus. The ministry said it also had ordered loan officers to discharge the debt of more than 17,000 people who attended Marinello and will continue to identify loans for discharge over the coming weeks.

The notice, which The Washington Post reviewed, makes no mention of when Post can expect to have its balance cleared, just confirmation that it will take time for the department to do so.

“Since it took them 167 days to just send the notification, I don’t have much faith in Secretary Cardona being quick to get the discharge,” said Post, who from 2004 to 2006 attended Florida Metropolitan University. , later known as Everest. University – one of several schools run by Corinthian.

Post repaid the $48,513 he borrowed for the legal assistance program at UFA, bringing his balance down to $9,400. He had hoped to continue his studies but was blocked by Corinthian’s refusal to provide his official transcript.

“Once I found out I couldn’t get transcripts, it was like paying for a worthless degree,” said Post, an insurance agent in Dallas. “I’ve had this debt on my credit for years.”

The recently sent notices show that the Ministry of Education is beginning to prioritize the backlog of discharge requests.

But Cato remains skeptical. When he first learned last year that he was eligible for relief, he said the department promised to repay the debt within 180 days. He received another email in October from the department, but this one without cancellation period.

“It’s kind of hard to trust anything they say now,” Caton said of the department. “It’s frustrating, but all I can do is hope.”

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