Education Department Pays Partial Student Loans in Majority of Cases

Education Secretary Betsy DeVos

The Education Department is partially paying for loans of college students defrauded by for-profit colleges.

The Figures

So far, under Betsy DeVos, the current education secretary, the department has approved 16,000 claims of fraud. Of those 16,000 claims, it paid for 1,000 loans in full and paid partial credit for 15,000 loans. It also denied 9,000 claims.

On average, payouts for partial loan credit cover 30 percent of the current loan balance. The median loan amount students file for is $11,500. After the department pays 30 percent of that amount, students are left with a $7,800 balance.

How does DeVos’ policy determine who gets what? The department bases its decisions on how much students are earning after they complete their school’s program. This is a change from Obama-era regulations. Then, students qualified for full loan payment once the department determined that schools had lied during their recruitment process.

Critics of DeVos’ Policy Change

Many see DeVos as favoring schools over students. They point out that DeVos hired officials from for-profit schools to join her department. They also remind us that the Obama administration didn’t deny any claims.

Clare McCann, an expert on higher education working for New America, a think tank in Washington, said of the Trump administration, “It’s very self-evident in the policies that they are proposing and implementing that they are there to look out for the for-profit colleges.”

Kimberly Fe, a 53-year-old who completed a program through Corinthian College in California, claims that the training the school gave her was inadequate. She also says the school lied about her credits being able to transfer to four-year programs at other schools. The Education Department paid $2,000 of Fe’s $7,000 loan.

“It was just a money-making machine,” Fe said of the school. “I want my money back. I want my time back.”

DeVos’ Response

DeVos said that it was unfair for taxpayers to pay victimized students’ loans completely. She also said that the new policy allows the department to give partial loan payments to students whom it might otherwise have denied.

In December, she said, “No fraud is acceptable, and students deserve relief if the school they attended acted dishonestly.” She added that the policy “will allow claims to be adjudicated quickly” and that it “also protects taxpayers from being forced to shoulder massive costs that may be unjustified.”

Regarding the 9,000 denials, DeVos says that the previous administration marked many for denial, but never finished the process.