Letter to Secretary Betsy DeVos follows a June 2019 letter from Klobuchar and Smith inquiring into the status of the group discharge application for borrowers from now defunct Globe University and Minnesota School of

WASHINGTON - U.S. Senators Amy Klobuchar (D-MN) and Senator Tina Smith (D-MN) are continuing to call on the Department of Education to address protections for student loan borrowers. In a letter to Education Secretary Betsy DeVos, Klobuchar and Smith called on the Department of Education to immediately stop collecting on the student debt of borrowers who were defrauded by Globe University (Globe) and Minnesota School of Business (MSB), discharge the covered loans, and process pending borrower defense applications. 

Klobuchar and Smith’s call follows recent news of Globe and MSB filing for bankruptcy, which may prevent these defrauded students from receiving any of the tuition refunds that a state court recently ruled the students are owed.The senators believe the federal government must immediately stop collections on these loans and provide these defrauded students with debt relief. 

“Students should be protected from predatory practices by academic institutions and the financial impact and academic disruption that occurs when a school closes,” the senators wrote. “It is critically important that the former students of Globe and MSB who were defrauded are able to pursue the discharge of their debt through borrower defense claims. Minnesota’s Attorney General has identified more than 1,300 students enrolled in particular programs at Globe and MSB in need of debt relief amounting to over $33 million, and recent court filings indicate that more than 7,000 former students of these colleges may be eligible for debt relief.” 

“We urge you to immediately stop collecting on the student debt of borrowers who were defrauded by Globe and MSB, discharge the covered loans, and process pending borrower defense applications.”

The full text of the letter can be found below:

Dear Secretary DeVos:

We write today to request that the Department of Education (“Department”) process the group discharge application on behalf of defrauded students who attended Globe University (Globe) and its affiliate, Minnesota School of Business (MSB). As you know, group discharge applications submitted by the attorneys general of 20 states seek loan relief on behalf of groups of student borrowers and are intended to eliminate the need for each student borrower to apply for relief individually.  

Students should be protected from predatory practices by academic institutions and the financial impact and academic disruption that occurs when a school closes. For this reason, provisions in the Higher Education Act permit student borrowers to seek loan forgiveness when they have been misled or defrauded by a college through a “borrower defense” to repayment. The 2016 “borrower defense” rule went into effect July 1, 2017 and a federal court has ruled that the Department must review the group discharge applications from state attorneys general. 

It is critically important that the former students of Globe and MSB who were defrauded are able to pursue the discharge of their debt through borrower defense claims. Minnesota’s Attorney General has identified more than 1,300 students enrolled in particular programs at Globe and MSB in need of debt relief amounting to over $33 million, and recent court filings indicate that more than 7,000 former students of these colleges may be eligible for debt relief. Action from the Department is particularly necessary as Globe and MSB have recently filed for bankruptcy, a move which may prevent defrauded students from receiving any of the tuition refunds that a state court recently ruled that students are owed.

On June 8, 2019, we wrote to inquire into the status of these group discharge applications and to urge you to provide full discharges to qualified borrowers. Since we sent this letter, former students have alleged in court filings that the Department continues to collect on the loans of defrauded students by seizing their tax refunds and garnishing their wages. On September 23, 2019, the Department published a new “borrower defense” rule that will only create additional barriers for students seeking relief—including a provision to eliminate automatic loan discharges for future groups of borrowers that will require a time-intensive review of claims on a case-by-case basis. According to data available on the Department’s website, more than 210,000 borrower defense claims from students across the country are still awaiting action by the Department.

Accordingly, we respectfully ask that you provide answers to the following questions by January 2, 2020:

1.      What is the current status of the Globe and MSB group discharge application?

2.      What is the average amount of time the applications of Globe and MSB borrowers have been pending?

3.      Will you stop involuntary collections and wage garnishments on the loans covered under the Globe and MSB group discharge application?

4.      Will you immediately discharge the loans covered under the Globe and MSB group discharge application?

5.      What steps has the Department taken to resolve the pending borrower defense claims asserted by borrowers nationwide?

We urge you to immediately stop collecting on the student debt of borrowers who were defrauded by Globe and MSB, discharge the covered loans, and process pending borrower defense applications.

Thank you for your attention to this important matter.

Sincerely,

Issues