US not granting loan relief to defrauded students: inspector general

The U.S. Education Department under President Donald Trump and Secretary Betsy DeVos has stopped cancelling the student-loan debt of people defrauded by failed for-profit schools and those borrowers face mounting interest and other burdens, its inspector general said on Monday.

DeVos is seeking to redo the process for cancelling the debts of people who attended Corinthian Colleges, which collapsed in 2015 amid government investigations into its post-graduation rates, and other failed schools.

In the final days of his administration, President Barack Obama approved rules speeding up the debt cancellations. DeVos has delayed implementing those rules, saying they would create significant costs for taxpayers.

According to a report by the inspector general, DeVos also brought the existing cancellation process to a crawl.

Since Trump's inauguration on Jan. 20, the department has received 25,991 claims for discharging loans. It has denied two requests and approved none, the inspector general, an independent auditor within the agency, found.

That is in contrast to Obama's final months in office. From July 1, 2016, through inauguration, the department received 46,274 claims and approved 27,986. It denied none.

Caught in limbo, borrowers are seeing interest and fees accrue and their credit damaged, the inspector general's report showed. Borrowers could ultimately owe more on a denied discharge than if they had not asked for cancellation and simply continued making payments, the inspector said.

Some state attorneys general have pushed the department to cancel the loans, saying students cannot afford to repay the often-large amounts because the schools did not give them adequate training or a diploma.

The inspector general also found the department did not have a sufficient information system and had to manually retrieve claims data.

"Hundreds of thousands of students were defrauded and cheated by predatory colleges that broke the law, but today’s report confirms Secretary DeVos tried to shirk her responsibility to these students and shut down the borrower-defense program, leaving them with nowhere to turn," said Senator Patty Murray, the senior Democrat on the Education Committee.

In a memo to the inspector general, A. Wayne Johnson, chief operating officer of the federal student aid program, said the department has "authorized an interest credit" for long-outstanding claims, will resume reviewing some claims and will soon approve claims for 11,000 Corinthian students.

(Reporting by Lisa Lambert; Editing by Cynthia Osterman)