By:  Lauren Camera
Source: U.S. News & World Report

DeVos Borrower Defense Rule Under Investigation by Inspector General

The inspector general is probing the Trump administration’s plan for how it will process more than 210,000 loan-forgiveness claims from borrowers defrauded by for-profit colleges.

THE EDUCATION Department's Office of Inspector General is investigating the new formula established by Education Secretary Betsy DeVos that's used to decide how much federal student loan debt relief that borrowers who have been defrauded by colleges can receive. 

According to sources familiar with the inspector general's ongoing audits and reviews as well as a document viewed by U.S. News, the investigation is in the initial stages, and findings are set to be published in spring 2021.

Last year, the Trump administration announced a new plan for how it will process a backlog of more than 210,000 claims for student loan forgiveness from borrowers defrauded by for-profit colleges – a strategy employing a formula that will provide only partial relief to the majority of them.

The new methodology, which represents a major shift from the more inclusive criteria for relief established by the Obama administration, uses various publicly available earnings data to compare median earnings of graduates who have made borrower defense claims to the median earnings of graduates from comparable programs. If the median earnings from the school in question are lower than the median earnings for that program at all comparable schools, then the applicants will be determined to have suffered harm and will receive student loan relief – either in full or in part, depending on how much lower the median earnings are.

Critics, including congressional Democrats, student loan advocacy groups and higher education policy experts, panned the new formula, arguing among many other things that it intentionally limits the amount of relief borrowers can receive by lumping them together with borrowers from other schools and drawing on earnings from programs that aren't comparable.

At the time, department officials said DeVos had the authority to create a new methodology for the debt relief that is in line with administration priorities – and in this case, for the White House, that priority was limiting the relief to those who were most seriously harmed. 

The rule has since been rebuffed by Congress with the support of Republicans in both chambers in a resolution that would have repealed it entirely if not for President Donald Trump vetoing the effort. In addition, the attorneys general in 22 states and the District of Columbia filed a joint lawsuit against the rule in July.

Rep. Bobby Scott, Virginia Democrat and chairman of the Education and Labor Committee, requested the Education Department's inspector general investigate the formula in March, writing in a 33-page letter that he and other House Democrats have questions about how the methodology was developed and approved, what various options and data sets were considered and the projected outcomes of those options.

Among other questions outlined by Scott is one that asks specifically if department officials considered the fact that some defrauded borrowers would be denied any and all relief because the average earnings of borrowers in the same program did not equate to negative earnings or below minimum wage earnings.

"We have concerns that the department did not consult internal or external statistical experts, did not have the methodology approved through proper channels, and did not sufficiently analyze the costs and benefits associated with its methodology," Scott wrote.