- Rule requires automatic discharge if college closes
- Nonprofit, states urge a stop to federal foot-dragging
By Emily Wilkins | November 13, 2018 03:57PM ET | Bloomberg Government
A California legal-aid and counseling group is suing the Education Department over its failure so far to discharge student loans for borrowers who were attending a college when or just before it closed.
The automatic discharge was a part of an Obama-era regulation that went into effect in October after a federal judge overturned Education Secretary Betsy DeVos‘s effor to delay the rule.
The rule has been in effect for less than a month, but borrowers already are being hurt by having to make payments on loans that should be non-existent, said Noah Zinner, managing attorney for the Housing and Economic Rights Advocates, the nonprofit that filed the suit in the U.S. District Court for the Northern District of California.
“There are very few resources available to student borrowers where they can get help understanding and obtaining their rights,” he said in a statement. “Many former students who should rightfully have had their loans canceled are still unknowingly and needlessly struggling to pay them.”
The group is represented by the National Student Legal Defense Network, a nonprofit organization that has challenged the department in past lawsuits.
Housing and Economic Rights Advocates argue in the lawsuit that because the rule’s delay was found to be unlawful, the department should have been prepared to begin automatic discharge on July 1, 2017—the date the regulation was initially set to take effect.
State attorneys general also told reminded the department in an Oct. 30 letter of its obligation and requested a timeline for when the loans would be discharged.
The Education Department didn’t respond to questions about a timeline for automatically discharging student loans, but spokeswoman Liz Hill previously said the department is planning to release guidance on how the whole regulation would be carried out.
Betsy Mayotte, president of The Institute of Student Loan Advisors, said getting the guidance together can take as long as two months.
“Due to the multiple levels of clearance such letters must go through, it generally takes the ED between 30 and 60 days to publish such guidance,” she said in a statement to Bloomberg Government. “Although this situation is fairly unique, I would expect a similar time frame.”
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