WASHINGTON — Education Secretary Betsy DeVos on Thursday vigorously defended her decision to grant partial or no loan relief to tens of thousands of students who were misled by for-profit colleges, blaming the Obama administration for overpromising debt relief.
Appearing before the House Education Committee, Ms. DeVos faced Democrats who have accused her of unjustly denying relief to cheated students left with worthless degrees, who sought debt forgiveness. A once-obscure rule, called “borrower defense to repayment,” has become one of the most embattled at the department after the collapse of two for-profit college chains, Corinthian Colleges and the ITT Technical Institute.
The Education Department found the chains to have misled students with false claims about their job prospects and salaries, and the Obama administration determined that students were entitled to full relief.
According to an internal document reviewed by The New York Times, and first reported by U.S. News & World Report, the department will begin notifying about 17,000 borrowers — roughly 6,000 from Corinthian — whether they will get full loan relief; 95 percent will be denials.
Ms. DeVos said her department’s overhaul of the debt-relief rule marked a “course correction” from the previous administration, which she claimed “weaponized” it to target for-profit colleges, and award “blanket” relief to borrowers who may not have deserved it.
“I understand that some of you here just want to have blanket forgiveness for anyone who raises their hand and files a claim, but that simply is not right,” Ms. DeVos told lawmakers.
The hearing was convened as the Education Department began notifying borrowers who claimed they were defrauded how much debt they will have to pay back. Her new rule, which takes effect in July, will require applicants to demonstrate personal financial harm, even if their colleges were proved to have misled students. This week, the department announced a new methodology that grants relief to applicants based on their classmates’ earnings.
“If somebody went into one of these programs hoping to become a nurse, for example, and now they’re selling clothes at a department store, it doesn’t mean that they weren’t defrauded,” protested Representative Suzanne Bonamici, an Oregon Democrat and a former consumer protection lawyer.
Committee members used their constituents to illustrate the effect Ms. DeVos’s policy will have: a Corinthian borrower who died waiting for her loan to be forgiven; a single mother with a sick son who has to take out loans for his hospital visits because she is still saddled with debt from a defunct education program; a disabled veteran who attended an ITT program using his G.I. bill funding but was left with a $50,000 student loan, no job and no degree.
“Does a university not have a responsibility to provide what it claims it will?” asked Representative Susan A. Davis, Democrat of California. “There is literally no other consumer protection that does not restore full repayment of a fraudulent product.”
Ms. DeVos maintained that it was “probably the case” that Corinthian Colleges deceived students, but she also said she believed that the “prior administration basically forced schools like Corinthian out of business” with onerous financial restrictions. She rebuffed questions about an investigation by career staff, unveiled in January 2017 memos published by NPR on Wednesday, that concluded that Corinthian students deserved full loan forgiveness because they received no educational benefit.
“I don’t agree with that narrative,” she said. “I think there are many students that received a valuable education, just like they do from many other institutions. The question is what students among them were financially harmed.”
Ms. DeVos said her Education Department inherited 65,000 claims from the Obama administration, and nearly 300,000 are still waiting to be decided. She said she was frustrated by the backlog, which she blamed on litigation. The Obama administration, she added, was “encouraging claims to be filed when it knew it lacked the ability to track them” and had no process to approve them.
That was false, Democrats responded. A 2017 report from the department’s inspector general described the agency’s process for evaluating claims — the Obama administration approved around 32,000 — but staffing dwindled to zero after Ms. DeVos took office. A federal judge ordered the department to halt using the Social Security Administration to adjudicate the claims, they said, but that did not preclude the department from processing approved applications or issuing denials.
While the Office of Inspector General noted deficiencies in the Obama administration’s process, it said it was “pleased to note that O.I.G. did not identify any errors in the adjudicated claims, and that the review for each of the sampled claims was properly documented.”
Republican members came to Ms. DeVos’s defense, echoing that she had “inherited a mess” and was protecting taxpayers.
Ms. DeVos could not provide data for the number of claims she believed to be invalid, but told the committee that “your jaw would drop” at some of the complaints. She cited an example of a borrower who filed a claim because “they did not like their professor.”
Representative Virginia Foxx of North Carolina, the top Republican on the committee, pointed out that over two decades, only a few dozen claims had been filed under the borrower defense rule, until 2015 when Corinthian collapsed.
“So obviously something happened,” she said. “Yes, those schools closed, but there’s been a culture change, I believe in our country, in terms of what people believe they’re owed.”
Representative Greg Murphy, Republican of North Carolina, agreed. “I do think the federal government has led to some of the problems we’re having in higher education right now because the money is so — free.”
Stacy Cowley contributed reporting from New York.