Consumer groups seek to force Ed Department to forgive Westwood College students’ loans

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Dive Brief: 

  • A group of higher ed and consumer advocacy groups filed a lawsuit last week against the U.S. Department of Education requesting debt forgiveness for students who took out federal loans to attend the now-shuttered Westwood College, a for-profit chain. 
  • In late 2016, the attorney general for Illinois filed a group borrower defense to repayment application to the Ed Department on behalf of the state’s students who enrolled in Westwood’s criminal justice program. But the Ed Department still hasn’t made a decision on the application, which would grant defrauded students debt forgiveness if approved. 
  • The lawsuit follows a letter sent to the Ed Department earlier this month by Illinois Attorney General Kwame Raoul. “There is no more analysis or evidence needed: Westwood defrauded all students who attended its Illinois criminal justice program,” he wrote. “The Department — and only the Department — knows which defrauded borrowers continue to carry federal loan debt for their time at Westwood.” 

Dive Insight: 

The lawsuit is at least the second complaint filed against the Ed Department in recent months seeking to resolve outstanding group borrower defense claims. The borrower defense rule allows students whose institutions defrauded them to have their federal student loans forgiven. 

The complaint comes as pressure mounts on the Biden administration to implement widespread student loan forgiveness. President Joe Biden’s advisers have been working on proposals that would target forgiveness based on income, Politico reported earlier this month. In the meantime, the administration has been discharging the debt of students defrauded by colleges, canceling some $17 billion in student loans as of the beginning of April. 

But the Illinois lawsuit alleges that some students have been waiting too long for relief. 

In 2015, the state reached a settlement with Westwood over allegations that the college was misleading criminal justice students about their employment prospects post-graduation. The for-profit college agreed to put $15 million toward forgiving loans students obtained through the institution. That action, however, did not address their federal debt. 

The Ed Department’s lack of movement on the state’s group borrower defense application has left students in limbo, the lawsuit argues. The National Student Legal Defense Network, known as Student Defense, along with the National Consumer Law Center and Lawyers’ Committee for Civil Rights Under Law filed the lawsuit on behalf of the affected students. 

“For nearly six years, across administrations, the Department has shirked its obligations, leaving countless borrowers in the dark about whether or when they’ll receive the relief they’re owed under federal law,” Eric Rothschild, litigation director for Student Defense, said in a statement. 

Meanwhile, the Ed Department has relied on the facts and evidence included in the group application to approve borrower defense applications submitted by individuals, the lawsuit alleges. 

In February, the department discharged $53.1 million in federal loan debt held by 1,600 borrowers who attended Westwood College from 2002 to 2015 and submitted individual borrower defense applications. The announcement followed similar actions the Ed Department took in July 2021, when it said it had approved a batch of borrower defense claims against the institution. 

But these actions did not discharge the federal student loans of students who did not submit individual borrower defense applications, according to the lawsuit. It argues that the Ed Department’s lack of a decision is a constructive denial of the group application, causing affected students financial harm and emotional distress. 

Three higher ed and consumer groups — Student Defense, the National Consumer Law Center and the Project on Predatory Student Lending — filed a similar lawsuit against the Ed Department last month for students who attended Kaplan Career Institute, another for-profit chain. It alleges that the department has shirked its responsibility to make a decision on a group borrower defense application filed by the Massachusetts attorney general in 2016 on behalf of students who attended Kaplan Career. 

An Ed Department spokesperson declined to comment, citing the pending litigation.

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