California AG sues DeVos over troubled public service loan forgiveness program

California Attorney General Xavier Becerra is suing Education Secretary Betsy DeVos over a roundly criticized loan forgiveness program designed for public service workers.

The lawsuit alleges that the Education Department (ED) is “flouting Congress’s clear and repeated instructions to provide student loan debt relief to public servants” and making loan forgiveness “virtually inaccessible” through a “convoluted application process” for these borrowers.

“College graduates who put in a decade of hard work and made timely payments on their student loans earned their [temporary public service] loan forgiveness. But Education Secretary Betsy DeVos chose to ignore all of that,” Attorney General Becerra said in a statement. “Today’s lawsuit reminds Secretary DeVos that she is not above the law.”

Becerra added that DeVos “is accountable to these college graduates who followed the rules and deserve better, especially amidst an economic crisis of historic proportions.”

Amid the coronavirus pandemic, this “mismanagement” of the loan forgiveness programs to public servants “is shameful and illegal,” the lawsuit stated. Yahoo Finance reached out to ED and will update with any comment. 

Anchor Maria Bartiromo interviews Education Secretary Betsy Devos on February 20, 2020 in New York City. (PHOTO: John Lamparski/Getty Images)

PSLF, TEPSLF explained

The Public Service Loan Forgiveness (PSLF) program was created in 2007 by Congress to encourage students to enter public service jobs, such as teaching, fire fighting, and so on.

The promise made for undertaking such jobs would be that after they made 120 on-time loan payments (or 10 years’ worth), they’d have then remaining balance forgiven. 

In 2017, when the first wave of applicants actually applied for the forgiveness, and they were denied en masse — ED was reported to have denied 99% of all applicants. One of those applicants, Kelly Finlaw, an art teacher in New York City, spoke about her experience in a Yahoo Finance podcast.

Congress gave ED an opportunity to fix the situation in 2018, creating a secondary program called Temporary Expanded Public Service Loan Forgiveness (TEPSLF).

But two years later, ED continues to have a 94% rejection rate.

As of March data from ED reveals that, 29,728 requests were made for TEPSLF. Around 6% of request were approved, the average balance discharged being $42,943.

As of April this year, approximately 150,000 borrowers applied for PSLF, the original program. Roughly 1.7% of applications were approved. The average amount was $66,000.

The lack of implementation, the lawsuit states, meant that DeVos and ED have violated the Administrative Protective Act by failing to implement TEPSLF.

Despite many applicants completing the necessary requirements to qualify for the forgiveness, “nearly all of them have had their applications denied.” 

California Attorney General Xavier Becerra outside the US Supreme Court in Washington, DC, November 12, 2019. (PHOTO: SAUL LOEB/AFP via Getty Images)

The lawsuits keep coming

DeVos has faced a number of lawsuits since taking the helm of the department. 

On this issue of loan forgiveness, Aside from Becerra, the American Federation of Teachers have also filed a lawsuit on the PSLF’s shortfalls. 

At the same time, this is also not Becerra’s first legal action against one of the longest-serving cabinet members of the Trump administration. 

In March this year, he sued the department for “illegally rescinding” a 2014 rule called “gainful employment” that was designed tot protect students against predatory educational institutions. 

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