NSLDN and HERA Statement on Automatic Closed School Discharge Announcement

FOR IMMEDIATE RELEASE:

December 14, 2018

MEDIA CONTACT:

press@nsldn.org | 202-734-7495

NSLDN & HERA Statement on Automatic Closed School Discharge Announcement

Washington, D.C. – The National Student Legal Defense Network (NSLDN) issued a statement responding to the Department of Education’s announcement that it would begin discharging the loans of students who attended schools that closed. NSLDN filed a lawsuit in November, on behalf of Housing and Economic Rights Advocates (HERA), demanding that the Department of Education immediately fulfill its legal obligations and discharge the loans of tens of thousands of students whose schools or campuses have closed.

“This appears to be a positive development, but we will continue pressing the Department to ensure that every single eligible borrower receives the full and complete relief they deserve,” said NSLDN President Aaron Ament. “This automatic discharge rule was put into place because the impact of a school closure is so devastating on students’ plans and careers, and because many borrowers were not aware of the right to request a discharge. If it weren’t for Secretary DeVos’s unlawful delay of the rule in the first place, students would have gotten this relief in 2017 and public interest organizations like HERA would not have had to divert their limited resources to solve problems caused by this Department.”

“While it is heartening to hear that the Department is planning to do its job by stopping collections against students whose schools clearly failed them, it is important to note that the Department has already proposed rules that would severely limit this same relief in the future,” said HERA Managing Attorney Noah Zinner. “We urge the Department to reconsider these new restrictions on student debt relief.”

The Department of Education’s Borrower Defense Rule, a regulation finalized in 2016, instituted a provision known as Automatic Closed School Discharge – in short, the provision requires the Department to automatically discharge the loans of all eligible borrowers harmed by the abrupt closure of their school. The automatic aspect of the relief is especially important because students are often unaware of their rights – fewer than half of eligible borrowers affirmatively apply for relief.

Under Secretary DeVos, the Department delayed the July 1, 2017 implementation of the Borrower Defense Rule three times, and in September 2018, a federal judge held that the delays were unlawful, arbitrary, and capricious. After the judge’s order, the rule went into effect as if the Department’s illegal delays had never happened. However, until this announcement the Department and its servicers have continued to collect on loans that it is required by law to discharge.

Since November 2013 nearly 3,600 schools have either closed a campus or stopped operations entirely. Borrowers eligible for closed school loan discharge should receive the following benefits:

• Complete loan discharge: Borrowers who get a closed school discharge are no longer obligated to repay any outstanding loan principal, accrued interest, or collection costs.
• Refund of payments already made: Borrowers should be reimbursed for any and all payments made to date on the loan, including through wage garnishment or tax refund offsets
• Federal aid eligibility: Borrowers should be made eligible for new loans and grants, including Pell grants.
• Clear credit history: Any adverse credit history due to the loans should be deleted by the credit reporting agencies.

Housing and Economic Rights Advocates is a California statewide, not-for-profit legal service and advocacy organization dedicated to helping Californians — particularly those most vulnerable — build a safe, sound financial future, free of discrimination and economic abuses, in all aspects of household financial concerns. HERA provides free legal services, consumer workshops, training for professionals and community organizing support, creates innovative solutions and engages in policy work locally, statewide and nationally. Learn more at www.heraca.org

###

The National Student Legal Defense Network (NSLDN) is a non-partisan, non-profit 501(c)(3) organization that works, through litigation and advocacy, to advance students’ rights to educational opportunity and to ensure that higher education provides a launching point for economic mobility.

HERA and LEGAL SERVICES CENTER OF HARVARD LAW SCHOOL FILE CLASS ACTION COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF

December 20, 2017, Oakland, California:

This morning, borrowers represented by HERA and the Project on Predatory Student Lending at the Legal Services Center of Harvard Law School filed a nation-wide class action against the Department of Education for illegally and unfairly denying relief to tens of thousands of former Corinthian students who the Department already decided are entitled to have their loans discharged and their payments refunded.  Not only were they lied to by Corinthian, they have now been lied to by the federal government.

The case was brought by three named plaintiffs:

• Martin Calvillo Manriquez was talked into WyoTech’s automotive technology program over community college. He didn’t really have an opportunity to even touch cars or car parts while he was enrolled. The school didn’t have tools or certified instructors. While he was in school, he worked at an oil change shop earning $8 an hour. He kept seeing classmates who had graduated from his program applying for the same low-paying, non-technical job he already had. Most of them didn’t even get jobs changing oil. Martin has never had a job related to auto repair. Even though the Department determined that Martin was misled and cheated, and even though he applied to have his loans discharged, the Department has taken two years of tax refunds and garnished his wages to pay back his loans.
• Rthwan Dobashi owes more than $20,000 for the same program. He has also never worked in the field.  He is married, has two kids, and is expecting a third. In early 2016, he found out from the attorney general that he was eligible to have his debts from WyoTech cancelled, and he applied. He also told one of his friends from school, and his friend applied, too. His friend’s loans were discharged almost a year ago, while Rick still hasn’t heard anything from the Department.
• Jamal Cornelius’s attended the Information Technology-Emphasis in Network Security program at Heald College, and borrowed more than $25,000. His debt from Corinthian is the only line on his credit report. He has been waiting more than fourteen months for any response to his application for relief.

All three borrowers, and all class members, are entitled to relief pursuant to the Department’s Corinthian Job Placement Rate Rule, which it has established through countless public statements, previous discharges, and direct notice to tens of thousands of covered individuals. The Department may not now change this rule and apply changes retroactively. In other words, it is unlawful for the Department to go back on its word.

See the full complaint here.

Please contact us at inquiries@heraca.org or (510) 271-8443 ext. 300.