Betsy DeVos Lawsuit: California Sues Education Department For 'Mismanaging' Student Loan Forgiveness

California filed suit Wednesday against the Department of Education and Secretary Betsy DeVos for refusing to implement an expanded student loan forgiveness program who qualified for relief through community service.

State Attorney General Xavier Becerra accused DeVos of violating clear instructions from Congress to expand the program and grossly mismanaging the forgiveness program.

The Federal Reserve Bank of New York estimates federal student loan debt at about $1.5 trillion, with $100,000 or so more borrowed from private sources.

The complaint, filed in federal court in San Francisco, alleges the department failed to implement the Temporary Expanded Public Service Loan Forgiveness program, which makes people who received federal student loans eligible for forgiveness if some or all of their repayments were made under a plan that did not qualify for the Public Service Loan Forgiveness Program.

People working as family and child services employees, including teachers, police and correctional officers, and public defenders are eligible for forgiveness.

“College graduates who put in a decade of hard work and made timely payments on their student loans earned their … loan forgiveness. But Education Secretary Betsy DeVos chose to ignore all of that,” Becerra said in a press release.

The initial loan forgiveness program was created by Congress in 2007 to encourage college graduates to take public service jobs. The first eligible candidates began applying for forgiveness in 2017, but the Education Department denied 99% of the applications. The following year, Congress created the temporary program, told DeVos to simplify the rules and implement the application method within 60 days.

As of September, 90,962 borrowers sought loan forgiveness, with just 845 gaining forgiveness under the Public Service Loan Forgiveness Program, Lendingtree’s Mark Kantrovitz said. The forgiven loans had an average balance of $61,592.

“It is now two years after [Education Department’s] statutory deadline and [the Education Department] has continued to grossly mismanage the program. [The Education Department] has not only failed to create a simple method for borrowers to apply for [loan relief], but has denied applicants at nearly the same rate as [earlier] applicants – 94 percent,” the release said.

Becerra earlier sued the department over repeal of student loan borrower protections under the gainful employment rule.

DeVos also moved to deny loan debt relief to veterans targeted by predatory, for-profit institutions. President Trump last week vetoed a bipartisan bill to block DeVos action. She argued Obama administration rules were too broad and too generous.