Quiet Biden student loan forgiveness for 200,000 borrowers gave black eye to colleges: Administrator

Jeremiah Poff

March 10, 04:50 AM March 10, 04:50 AM

An administrator from a Florida university says the Biden administration unfairly labeled his institution as a malefactor when it negotiated a settlement to discharge student loans in a lawsuit brought by a group of students who said their colleges had misrepresented themselves.

Last summer, the Department of Education announced it was settling the Sweet v. Cardona lawsuit, which had sought a court order to force the department to adjudicate claims made under the Borrower Defense Loan Discharge program, which allows the department to provide loan relief for students who were defrauded by their universities.

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The claims in Sweet v. Cardona were exclusively brought against for-profit colleges and colleges that used to be for-profit but have converted to nonprofit status. The suit was initially filed against former Secretary Betsy DeVos during the Trump administration and sought to force the department to act on borrower's defense claims.

"The Sweet lawsuit basically said, 'You've been sitting on these claims for too long. You owe these students that adjudication of the claims,'" former principal deputy undersecretary of education in the Trump administration Diane Jones told the Washington Examiner. She said that the department under DeVos had developed a methodology for adjudicating the claims, but it was later blocked by a federal court.

Following the transition to the Biden administration, the department's approach to the case shifted. Instead of adjudicating the individual claims as requested by the lawsuit, the Biden administration under Secretary Miguel Cardona chose instead to settle the lawsuit and provide blanket loan forgiveness to thousands of borrowers who attended a list of roughly 150 colleges, including the University of Phoenix, Grand Canyon University, DeVry University, Florida Technical College, and Keiser University.

Arthur Keiser, the chancellor and CEO of Keiser University in Florida, told the Washington Examiner in an interview that the university, which is owned by the parent organization Everglades College Inc., has suffered reputational harm after being listed on the settlement. Keiser said the university, which is fighting the settlement in court, was never afforded the opportunity to see the complaints that accused the institution of defrauding students, nor provided with an opportunity to defend itself.

"We've had prospective students who've not enrolled because of this [settlement]," Keiser said. "We're concerned, we don't understand it, and we have never seen a single complaint that the department has talked about."

Last month, U.S. District Court Judge William Alsup rejected a motion by Everglades College Inc. and two other schools listed on the settlement that sought to block the department from implementing the settlement. In his ruling, Alsup rejected the college's claims that they had suffered reputational harm.

"Two months after that order issued — and more than seven months after the settlement ... [was] made public — movants’ assertions of reputational harm remain markedly speculative, [and] 'grounded in platitudes rather than evidence,'" Alsup wrote.

In a statement to the Washington Examiner, a spokesperson for the Department of Education said it was "pleased that the court’s decision has allowed implementation of the settlement to move forward for the vast majority of covered borrowers."

"The Department has started the process of implementing the settlement, which will provide billions of dollars in long-awaited relief to more than 200,000 borrowers and will resolve plaintiffs’ claims in a fair and equitable manner," the spokesperson said. As to the concerns of reputational harm, the department pointed to Alsup's ruling. It's unclear how much the U.S. government's mass loan cancellation will cost.

Despite Alsup's ruling rejecting a stay on discharging loans, Nicholas Kent, the chief policy officer for Career Education Colleges and Universities, told the Washington Examiner that he expects the judge's ruling to be appealed to the 9th U.S. Circuit Court of Appeals and ultimately be overturned.

Kent said that the 9th Circuit had previously struck down a ruling by Alsup in the same case that would have compelled a deposition of former Education Secretary Betsy DeVos, and he expected the settlement itself to be struck down on appeal.

"We feel that the 9th Circuit will also strike down the settlement at the circuit level," Kent said. "The court's argument is, in part, 'well, you already got the money, and the department is saying that they can't go after you because of the settlement.' But there's huge reputational harm that has been done as a result of being labeled a wrongdoer on that list. The school didn't get any due process to raise their hand and say, 'Listen, this isn't true.'"

Keiser theorized that the Education Department and the Biden administration were disregarding the concerns of the colleges because they were trying to use the legal settlement as a backdoor to student loan forgiveness. Last year, the administration announced plans to forgive up to $20,000 in federally held student loans for borrowers making less than $125,000. The legality of the plan now awaits a ruling from the Supreme Court.

"We really just want to be let off the list," Keiser said. "It becomes a real challenge for us to be part of a settlement that declares that we had misconduct, which we did not. There's no evidence of misconduct on behalf of our institutions."

In a statement to the Washington Examiner, the department rejected any notion that the administration was using the settlement as a way to backdoor loan forgiveness.

"The settlement is about providing long-awaited relief to more than 200,000 borrowers and resolving the plaintiff’s claims in a fair and equitable manner," the department spokesperson said.

Jones, the former Trump administration official, was skeptical of the idea that the department was using the settlement to enact as much loan forgiveness as possible and instead chalked it up to a general hostility toward for-profit colleges.

"The effect of the settlement does indeed provide an opportunity for loan forgiveness, but I don't think that the primary purpose of it was to do what they're doing on a larger scale," Jones said, referring to the broad loan forgiveness plan. "If it was, they would be using borrower's defense to forgive loans at many, many, many institutions that have admitted to misrepresentation."

"I think the intent is really to shut down the for-profit schools because the administration has not used borrower defense to go after any other school that has been guilty of misrepresentation other than for-profits," she added. "If they really wanted to use it for loan forgiveness, there's a million nonprofits they could go after, but they don't want to. They just want to shut down the for-profits."

CECU's Kent likewise accused the Biden administration of being deliberately hostile to for-profit colleges, noting that the administration "certainly has politically favored institutions," which does not include for-profit schools.

"This administration has done a lot of things that make it harder for for-profit institutions to serve students and to serve the community," he said. "I think that they favor public institutions and colleges, and I know that a lot of the policies that they have put out over the last couple of years, and are proposing to put out over the next couple of years, have a detrimental effect on for-profit institutions."