Biden's Education Department wants $24 million from a for-profit school accused of causing student debt to pile up for borrowers
The Education Department announced a $24 million recoupment effort against DeVry University.
The department accused DeVry of misleading students on job prospects from 2008 to 2015.
DeVry said it received the notice and does "not agree with the conclusions" the department reached.
President Joe Biden's Education Department just took the first step in holding a for-profit school liable for student-debt cancellation costs.
On Tuesday, the department announced its second-largest approval of a group borrower defense claim — a claim a borrower can file for debt relief if they believe they were defrauded by a school — for former ITT Technical Institute students, totaling $3.9 billion in relief. While that was the main focus of the announcement, and welcome news for students who attended ITT between 2005 and 2016, the department also announced a $24 million recoupment action against DeVry University to cover the costs of approved borrower defense claims.
In February, the department discharged student loans for 1,800 former DeVry students after it found that the school "repeatedly misled prospective students across the country" from 2008 through 2015 by misrepresenting job prospects, according to a press release. This recoupment effort concerns the first group of borrowers whose debt relief is currently in process with their loan companies, and the department said it expects the number of approved claims to grow and will continue to seek further recoupment efforts, if needed.
A DeVry spokesperson said in a statement to Insider that they received the department's notice and are reviewing it, and the school "remains deeply committed to student success and preparing students to thrive in careers shaped by continuous technological change."
"It is worth reiterating that those student claims date back to advertising that was used between 2008 and 2015, predating DeVry's establishment as an independent institution with a new Board and leadership," the spokesperson added. "We continue to believe the Department mischaracterizes DeVry's calculation and disclosure of graduate outcomes in certain advertising, and we do not agree with the conclusions they have reached."
According to the department, DeVry has 20 days from the time the notice was issued to submit additional information or request a hearing on the issue, and if they fail to do so, the department will require DeVry to pay the specified amount.
During a Tuesday press call, Federal Student Aid Director Richard Cordray noted that DeVry is an "unusual instance where we have our defense claims against an institution that remains open." For reference, prior approvals of borrower defense claims have been from for-profit schools that closed their doors, like ITT Tech and Corinthian Colleges. Cordray said that it's "difficult to get money back from a closed institution."
"It is something that we are looking to do in instances going forward here, wherever we can," he said. "And we're developing some new policies along those lines because we do think it's really important for especially individual officials and leaders of these schools to take responsibility for the failures of the school. But that is not how things worked in the past, and it's one of the improvements we're trying to make."
While Tuesday's announcement provided welcome relief for thousands of borrowers, millions of others are waiting for Biden to announce two major decisions: whether he will further extended the federal student-loan payment pause past August 31, and if he will cancel student debt broadly before then. Education Secretary Miguel Cardona said that borrowers will have an update "soon," but they are continuing to wait with less than two weeks to go.
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