Prepared Remarks by Secretary DeVos to the House Education and the Workforce Committee

Prepared Remarks by Secretary DeVos to the House Education and the Workforce Committee

December 12, 2019

Chairman Scott, Ranking Member Foxx, and Members of the Committee:

Let me first thank the committee for its willingness to make this a productive hearing. We have provided the committee 18,000 pages of documents during the past month on borrower defense alone, we have briefed you several times, and I'm hopeful we can use today's hearing to continue in that spirit of constructive dialogue.

Let me also thank you for the opportunity to set the record straight on this Administration's approach to borrower defense to repayment.

I want to be very clear: Students are my number one priority. They are why I come to work every day. So, if students have been deceived by institutions and suffered financial harm as a result, they should be made whole. But if claims are false, or students did not suffer financial harm, then hardworking taxpayers (including those who scraped and saved to faithfully pay their own student loans) should not have to pay somebody else's student loans too.

It's a matter of fairness.

Adjudication of these claims must treat all students and taxpayers fairly. Simply discharging all of these loans, as some on this committee suggest be done, is not fair to taxpayers nor to those who have paid or are paying their loans.

This Administration's commitment to fairness and the rule of law continues to guide our thinking with regard to borrower defense. When "borrower defense" arrived in 1995, it was a regulation in the Higher Education Act that was little known and little used. In fact, in the 20 years from 1995 to 2015, fewer than 60 claims were filed. Then the previous Administration weaponized the regulation against schools it simply didn't like. They applied the law in a discriminatory fashion. So, since 2015 there has been a 5,000 percent increase in borrower defense claims.

This Administration is committed to pulling back the previous Administration's overreach and will enforce a borrower defense rule that is consistent with Congress's intent, that protects all borrowers, and that treats taxpayers and schools fairly.

Before I discuss the important distinctions of our Borrower Defense Rule, let me begin by saying what it does not do.

First, it does not apply retroactively. When our Rule goes into effect on July 1, next year, it will apply only to loans first disbursed after that date. This means that the Department will continue to enforce, in good faith, the previous Administration's 2016 rule for all loans disbursed between July 1, 2017 and July 1, 2020.

Second, our Rule does not shield any school from accountability, nor does it relax oversight of bad ones. All institutions, no matter their tax status, are held accountable under our Rule.

Finally, our Rule does not demand that students prove that their school intentionally deceived them. Instead, the Rule provides due process for all parties. Our process focuses on individual students and requires evidence from both the borrower and the school before deciding a claim. And, unlike the prior Administration's Rule, the student always has the opportunity to respond to the school's case.

Now let me discuss the basics of what our Rule does do.

First, our Rule puts into place a process that is clear, understandable, and easily accessible for borrowers. It also ensures that claims are processed efficiently, carefully, transparently, and fairly.

Second, students may file either affirmative or defensive claims, all of which will be judged using a preponderance-of-the-evidence standard.

Third, our Rule provides a legally grounded, reasoned, and appropriate definition of "misrepresentation." It enables both borrowers and institutions to present evidence, obtain relevant evidence we're considering in the case, and respond to any evidence in the record.

These reforms constitute much-needed course corrections to the 2016 Rule currently in place. The Obama administration's Rule punishes for-profit schools but gives non-profits a pass for the very same conduct.

Now, let me turn to the ongoing adjudication of existing claims before the Department.

Yes, there is a backlog of borrower defense claims at Federal Student Aid. To say that I am frustrated by that is an understatement. But rather than focus on why there is a backlog, too many have instead focused on creating more chaos and a circus-like atmosphere.

Here are the inconvenient facts about borrower defense: First, we inherited from the Obama Administration more than 64,000 borrower defense claims. So, I asked the IG to investigate why they had made such little progress processing those claims. The IG found material "weaknesses" in the previous Administration's procedures for approving and denying claims.

In fact, the prior Administration was encouraging claims to be filed knowing full well it lacked the ability to even accurately track them. It had no process in place for reviewing any claims. And it knew that the Department couldn't quickly and legally give blanket forgiveness of all loans. So when they left office, they left tens of thousands claims behind.

Greeted by this crushing number of applications and without effective guidance from Congress, we took action to establish a process for reviewing the backlog, using the prior Administration's categories as our baseline. We quickly adjudicated 32,400 claims.

Our relief methodology was based on the same data—Social Security Administration data to be exact—that the Obama Administration used to measure schools under their "gainful employment" rule.

Unfortunately, in May of 2018, a federal district court in California determined that using that data violates the Privacy Act. We strongly disagree and have been waiting for a decision on appeal from the 9th Circuit for well more than a year. The Department stands ready to process these claims. I want to process these claims. We simply need a decision from the court.

In the meantime, we're doing everything we can to process claims in another manner. I recently approved a new, scientifically robust methodology that relies on publicly available 2017 Gainful Employment earnings data, Social Security Administration earnings, College Scorecard data, and IRS information to determine harm and calculate the amount of relief.

Ultimately, what the Department wants, what I want, and what taxpayers deserve, is to provide fair relief to all those borrowers who actually have been harmed. That is what the law requires, that is what you intended by the borrower defense to repayment law, and that's what we are doing.

Thank you. I will be happy to answer your questions.