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More Student Borrowers Get Relief Under Repayment Defense Rule | Alston and bird

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Our education team explores how a new round of repayment waivers – totaling $238 million for 28,000 student borrowers – heralds a return to group waiver use.

  • This action signals that the Ministry of Education continues to focus on for-profit schools
  • The group release had not been used since the Obama administration
  • The department identified the owners and board members of the Marinello Beauty Schools, but did not say it would sue them for payment.

The U.S. Department of Education has once again approved hundreds of millions of dollars in borrower defense against repayment waivers for student borrowers, signaling an ongoing crusade to alleviate student loan debt with what seems focus on the for-profit sector.

On April 28, 2022, the department announced that it would provide relief totaling $238 million to 28,000 student borrowers who attended Marinello Beauty Schools, which closed in February 2016. applies to all borrowers who attended Marinello between 2009 and 2016, including many who did not even seek borrower defense assistance. This class release was based on the department’s findings that Marinello engaged in pervasive and widespread misconduct that negatively affected all borrowers who enrolled with Marinello during the Covered Period.

Marinello’s release “is the first group release for defrauded borrowers to be approved since 2017,” according to the department’s April 28, 2022, press release. Under regulations applicable to the group borrower process, the Secretary to Education can consolidate claims against an institution that allege “common facts and claims” and resolve borrower defense claims as a group. This return to the use of group discharge—a practice that has not been used by the Trump administration—demonstrates the department’s willingness to discharge broad categories of borrowers that the department believes are in the same situation.

The department’s press release identified the owners of Marinello at the relevant time and the identities of some of its directors, but fell short of saying that the department intended to prosecute these individuals for the costs of these rejections. As Alston & Bird previously reported in February, the department approved $415 million in loan discharges for students who attended DeVry University, Westwood College, ITT Technical Institute and Minnesota School of Business. / Globe University. The DeVry student releases marked the first time the department had approved borrower defense claims associated with an operating institution, and the department said in this instance it would “seek to recover the cost of DeVry’s releases.”

The department’s April 28 press release touted that Marinello’s discharges “bring the total amount of relief approved based on borrower defense findings during the Biden-Harris administration to approximately 2.1 billion for 132,000 borrowers” and that, overall, the department has approved more than $18.5 billion in loan releases for more than 750,000 borrowers. The ministry reaffirmed its commitment to “strengthen [its] oversight and enforcement of colleges and vocational schools that have engaged in misconduct” and announced four key hires to the Federal Student Aid Office of Enforcement, including the former director of education policy for the senator American Richard J. Durbin (D-IL) who focused on “providing student loan debt relief for defrauded borrowers.”

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