For some defrauded students, only partial loan forgiveness

By MARIA DANILOVA, Associated Press

WASHINGTON (AP) — The Department of Education has begun notifying some former Corinthian Colleges students that it will forgive only one-half or less of their federal student loans, even though the students were defrauded by the now-defunct schools, The Associated Press has learned.

The action is part of Education Secretary Betsy DeVos' push to ease regulations governing for-profit schools. DeVos says she wants to protect taxpayers' money, but critics say the Trump administration has deep ties to for-profit colleges and is putting industry interests ahead of students.

Two weeks ago, Sarah Dieffenbacher, a California health care worker, received a letter saying the agency would discharge only 50 percent of her student loans. The mother of four had borrowed about $67,000 to train as a paralegal at Everest college in Ontario, California, part of the Corinthian chain, but was unable to land a job in the field.

In her first interview since receiving the agency's decision, Dieffenbacher told the AP on Thursday that the decision was utterly unfair.

"I think it's an insult to my intelligence. I think it's a kick in my face. I think it's degrading," Dieffenbacher said. "I received no valuable education from them."

Alec Harris, Dieffenbacher's attorney with the Project on Predatory Student Lending at Harvard University, said: "There is no justification for making Sarah and others pay for having been cheated. The Department's actions are incoherent and vindictive."

Department press secretary Liz Hill defended the agency's decision.

"We have said from the beginning that students whose earnings are at 50 percent or more of their peers who attended a gainful employment passing program will receive proportionally tiered relief to compensate for the difference and make them whole," Hill said in a statement Friday. "This method treats students fairly and treats taxpayers fairly."

The gainful employment rule was designed to ensure that graduates would be able to earn enough money to pay off their student loan debt. DeVos has appointed a special committee to rewrite the rule.

She announced in December that she also was breaking with the Obama administration's practice of fully wiping out the loans of defrauded for-profit students and would grant some only partial relief.

"No fraud is acceptable, and students deserve relief if the school they attended acted dishonestly," DeVos said then. The new process will be more efficient and "protects taxpayers from being forced to shoulder massive costs that may be unjustified."

Hill would not provide data on how many students have received partial relief announcements. The agency has tens of thousands of claims from students pending.

The relief grant to Dieffenbacher was made by comparing the average earnings of students in her program to the average earnings of students who graduated from similar programs at other schools, according to the department's letter viewed by the AP.

Student advocates have argued that the formula does not take into account whether Corinthian graduates are employed in the fields of their study or are simply working other jobs.

Such is the case with Dieffenbacher, 40, who was unable to get hired in the legal field. She says the school lied to her about credit transfers, job placement prospects and the quality of her education. She went on to train in a different field and now works as a phlebotomist.

"If you want to show me a degree from Everest that I can use to proceed in the legal field, then I would call it value," Dieffenbacher said. "How can you value something that doesn't exist?"

Dieffenbacher says her entire income goes to support her children, and she has no money to pay off the loan. She said she will not accept the agency's decision. Dieffenbacher is also suing the department in a parallel case to stop it from garnishing her wages.

The Obama administration went hard after the for-profit sector, closing down defunct for-profit chains, including Corinthian, and putting in place tougher regulations. Under President Barack Obama, tens of thousands of students deceived by Corinthian and other schools had more than $550 million in federal student loans canceled in full.

DeVos has frozen those regulations, and her office has been assisting a suspended accrediting agency that oversees for-profit schools in trying to come back to life.

Rick Hess, head of education policy at the conservative American Enterprise Institute, said DeVos' approach was more responsible.

"Any of us who has ever taken a loan for a house or car or a degree would like 100 percent loan forgiveness. We also pay taxes and we want people who borrow public dollars typically to repay them," Hess said.

"But I think that what this administration is getting right is trying to strike that balance between respecting the rights to wronged borrowers and respecting the rights of taxpayers."