LaKesha Howard-Williams was excited when she enrolled at the Illinois Institute of Art in 2017 to finish college. But she quickly began to have doubts about the education the for-profit school provided. She was disappointed by the quality of the coursework and teaching, as well as the drop-out rate of other students in the first few terms. Then, in the summer of 2018, she learned the school had lost its accreditation and hidden that fact from students for six months.
“I felt betrayed. I felt angry,” Howard-Williams, 26, said. “It was a waste of money.” She estimated that she and her mother took out nearly $30,000 in student loans for the Art Institute alone. When she took an offer to transfer to Columbia College and finish her degree, she was set back an entire semester, adding to a mounting debt load that her family, who was struggling after losing their home to an eviction, could not afford. She took a part-time job in an effort to pay for school and began crashing on her brother’s couch.
“That accumulated debt changed everything,” Howard-Williams said. “It made it difficult for me to pay my financial expenses.”
In theory, students like Howard-Williams are protected from such deceptions under the Higher Education Act. But in recent years — and even in 2020 as the coronavirus pandemic devastated the U.S. economy — Secretary of Education Betsy DeVos has systematically propped up low-quality schools and rejected relief requests from large groups of defrauded students. Those whose applications were accepted often received little compensation. That is where groups like Student Defense have stepped in, litigating against the Department and schools themselves on behalf of student borrowers in order to halt these abuses and make students whole.
“What you see is really serious allegations where these companies drove millions of borrowers into billions of dollars of needless debt,” said Seth Frotman, executive director of the Student Borrower Protection Center, a group focused on stopping widespread abuses in the higher education industry through advocacy and legal action. “And for the last four years, you have a federal government that has fought tooth and nail to try to stop these lawsuits.”
Today, with support from Arnold Ventures, several advocacy organizations stand on the leading edge of efforts to litigate for the discharge of student loans for victimized students. “It’s important that we use all the tools at our disposal to protect borrowers,” Frotman said.
A Route to Student Debt Relief
Over the past decade, an increasing number of students have fallen victim to predatory for-profit institutions and related companies that make false promises and award worthless degrees. A staggering 47 percent of students who attend for-profit colleges end up defaulting on their loans, compared to just 13 percent who attend nonprofit schools, according to a 2018 report from the Brookings Institution. These schools target low-income students of color in particular.
For the organizations working to protect student borrowers, litigation has become a promising tool for forcing the federal government to honor its own consumer protection policies. Among the best lines of recourse is a policy under the Higher Education Act known as “borrower defense to repayment,” which lets students apply for discharge of their federal student loans in cases where schools misrepresent themselves or close.
Proportion of students at for-profit colleges who end up defaulting on their loans, compared to just 13 percent who attend nonprofit schools
In 2016, under the Obama administration, the Department of Education created a process to make it easier for defrauded student borrowers to apply for relief.
Responding to the problem of multiple chains of for-profit schools — heavily subsidized by taxpayers — that saddled students with large debt loads for low-quality degrees, the Department gave the education secretary authority to discharge loans for large groups of students. It also protected students by requiring automatic loan discharge in the case of school closure.
DeVos, however, has opposed debt relief, and the Department has repeatedly undermined the program — denying, delaying, or refusing to process thousands of borrower defense claims from former students of notorious schools like Corinthian Colleges, ITT Technical Institutes, and the Art Institutes, in defiance of court orders. This year, the Department rewrote the rule again to make it harder for students to have loans canceled — and cancel a smaller amount in successful cases.
“The Trump administration has essentially taken the position that students and state agencies are preempted, under the Higher Education Act, from bringing big claims around misrepresentations,” said Aaron Ament, director and co-founder of Student Defense. “Courts around the country have rejected the position, but the Trump administration never rescinded its notice.”
Fighting in Court
Even in an environment hostile to defrauded students, borrower defense continues to be one of the most potent tools litigators have at their disposal. “One thing I think we’ve done a good job on is bringing strategic impact litigation that has resulted in a huge amount of relief to disadvantaged students,” Ament said.
That has meant asking courts to enforce protections for students under borrower defense. When schools close, the rule entitles students to automatic student loan discharge. But in many cases, the Department under DeVos has refused to implement that rule, instead continuing to collect on loans even after schools like Corinthian Colleges and ITT Technical Institutes shuttered. In 2018, Student Defense responded by bringing a lawsuit, Housing and Economic Rights Advocates v. DeVos, that resulted in more than $300 million of debt relief for tens of thousands of former students who attended schools that closed between 2013 and 2015.
Student Defense also filed a class-action lawsuit against the Department of Education for its illegal support of the Illinois Institute of Art and other schools that became ineligible for federal aid after they lost their accreditation. In 2019, the Department agreed to cancel $11 million in debt for students who took out federal loans after the schools lost accreditation. That included canceling Howard-Williams’s debt for her 2018 semesters at the Art Institute.
“It brought a very small amount of satisfaction,” Howard-Williams said.
In the long run, she hopes that higher education reform will include changes to the law that prevent abuses by for-profit schools. “We want justice,” she said. “It’s not just that we want our loans forgiven.”
Ament agrees. He said that when such litigation is brought strategically, it can not only offer student borrowers needed relief but spur policy changes at the state and federal level, making it more difficult for schools to continue widespread misconduct.
We want justice. It’s not just that we want our loans forgiven.LaKesha Howard-Williams defrauded student
Student Defense also recently filed a complaint against the Department on behalf of the American Federation of Teachers. It accuses DeVos of illegally repealing, in 2019, the “gainful employment” rule, which was implemented during the Obama administration to ensure that colleges issue degrees that lead to jobs that pay well enough to make repayment of student debt possible. The action asks the court to reinstate the rule, which would protect students who enroll in for-profit degree programs and potentially save taxpayers as much as $5.3 billion in federal funds to failing programs.
At Harvard Law School, the Project on Predatory Student Lending is also pursuing litigation against the Department to cancel debt for large groups of defrauded student borrowers. In 2019, the organization brought a lawsuit in California, Sweet v. DeVos, on behalf of a class of more than 200,000 students who were harmed by the Department’s refusal to decide any borrower defense claims for over 18 months at the beginning of the Trump administration. In October, the court denied a preliminary settlement, citing that the Department under DeVos had been issuing blanket denials with no rationale, and ordered discovery on the Department’s explanations of its process for deciding claims, an unusual measure in cases against the government. That case remains pending. The decision, however, “speaks to the judge’s conviction that the Department is doing something wrong,” said Toby Merrill, director and co-founder of PPSL. “That’s when you get discovery.”
More recently, the organization prevailed in Vara v. DeVos, a case brought in Massachusetts against the Department that will cancel the student loans of all 7,200 former Corinthian Colleges students. “It was an enormous win,” Merrill said. “It was the first time that a federal court had ever ordered a borrower defense discharge.” The decision is currently pending an appeal from the Department.
Meanwhile, the Student Borrower Protection Center has been waging legal battles that extend well beyond the borrower defense rule. The organization joined Student Defense and the National Consumer Law Center to sue the Department to bring Barber v. DeVos, a lawsuit that demands a stop to the Department’s illegal practice of seizing student borrowers’ paychecks during the coronavirus pandemic.
Starting in late 2019, SBPC also supported a lawsuit brought by Democracy Forward against the Consumer Financial Protection Bureau for ignoring flagrant abuses by student loan servicers throughout the Trump administration. The case seeks to force the agency to perform its legal obligation of overseeing federal loans that make up 80 percent — or $1.3 trillion — of student debt.
A New Landscape of Protection
With a new administration incoming, advocates are hopeful about the potential for a shift in the approach to protecting and providing debt relief to defrauded student loan borrowers. That would mean expanding the principles of individual lawsuits, like those that canceled debt for Howard-Williams and others, to create safeguards in state and federal law.
“You are able to get the most success when you marry individual enforcement actions with the policymaking apparatus,” said Frotman, who previously served as assistant director for the Consumer Financial Protection Bureau.
To that end, SBPC has worked in recent years with the law school at the University of California, Irvine, to establish the Student Loan Law Initiative. Its goal is to build a stronger legal foundation for the rights and protections of people with student loan debt, similar to what currently exists for those with a mortgage or a credit card. The initiative’s independent research and analysis, said Frotman, will help the Biden administration create policies that prevent further abuses of student borrowers.
“For the first time in a long time, I think there’s a sense of optimism about the ability to use litigation to help borrowers who have been ripped off by the student loan industry,” Frotman said. “And not only to help those borrowers but to drive larger systemic change.”