Betsy DeVos and the Department of Education have been ordered by a judge to make a speedy decision on Sarah Dieffenbacher's student debt relief case.
On Friday, June 9, a federal court ruled that a single mother of four, whose wages were being garnished by the government over student loans she took out to attend a now-defunct college accused of fraud, is entitled to a swift answer regarding whether her loans are eligible to be discharged, according to a court document obtained by the Legal Services Center of Harvard Law School.
The plaintiff, Sarah Dieffenbacher, has been seeking relief from her debt for more than two years. According to court documents, Dieffenbacher defaulted on her student debts after struggling to land a job as a paralegal with a diploma from a for-profit college that cost her more than $22,000.
Since defaulting, Dieffenbacher’s wages have been garnished by the government, exercising one of its most controversial powers which is to collect defaulted debts.
Going to the court, Dieffenbacher challenged the government’s power to collect based on her claim that the debt is not legally enforceable. The reasoning being that the school she attended, the Corinthian for-profit Everest College, lured her into enrolling by misleading her about future job prospects, the cost of attendance, and other things.
Toby Merrill, the director of Harvard Law School’s Project on Predatory Student Lending and one of the lawyers representing Dieffenbacher, said the following, “She’s had this fraudulent debt hanging over her for more than two years...I know that’s been really frustrating for her and I think really scary.”
Dieffenbacher sued the Department of Education after the government ignored her requests for relief and rejected her objection to wage garnishment. Interestingly enough, the Department of Education asked the judge to have the case removed from the court system, allowing the Department to make another internal decision on Dieffenbacher’s status.
On Friday, the judge denied that request and called it “frivolous and in bad faith.” Further, the judge ordered the Department of Education to make a decision on Dieffenbacher’s status and file it with the court within 90 days.
“It’s telling that the court seemed outraged by how long Sarah was waiting for relief ...and how hard it was for her to get the Department to consider the substance of her claim,” Merrill said, “At least in that sense it’s an indication of how far out of hand this process, or utter lack of process, is.”
On that note, the federal government actually intends to forgive the debts of thousands of student loan borrowers who attended Corinthian campuses under the same law that Diefenbacher called upon. This law, known as defense to repayment, allows federal student loan borrowers to have their debts wiped away in cases of fraud. It was formulated after outside pressure in the aftermath of Corinthian’s collapse in 2015 drove the Obama Administration to work out a system that provides relief to defrauded college borrowers. Today however, many former Corinthian students, like Dieffenbacher, are still awaiting relief.
Liz Hill, a spokeswoman for the Department of Education, stated that the Department is working with servicers to forgive the debt of borrowers whose loans were approved for discharge under the Obama Administration. “Some borrowers should expect to obtain discharges within the next few weeks,” she wrote.
However, the future of the borrower defense rule remains uncertain. Secretary DeVos has hinted that her department may be reconsidering them. Now, state law enforcement officials and borrower activists are worried steps taken by the Obama Administration will be reversed under the Trump Administration.
Last week, attorney generals from 20 states wrote a letter to Secretary of Education Betsy DeVos expressing concern that borrowers who received notices of debt forgiveness were not getting the relief in a timely manner. Additionally, Sen. Elizabeth Warren wrote an open letter to Sec. DeVos voicing similar concerns in the past.
“The difference is that under the Obama administration they were moving towards actually looking at the conduct of schools and saying your school engaged in fraudulent behavior,” said David Halperin, an attorney and critic of for-profit colleges, “When you give up on the idea of taking defense to repayment because of fraud seriously, then all students are left with are these very tough debt collectors.”
That being said, Halperin is encouraged by the judge’s decision on Dieffenbacher’s case. “This was a judge saying that although student borrowers in general are required to pay off their loans, the Department of Education is supposed to look at circumstances where students were defrauded and not treat students like they’re crooks,” he said.
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