Washington — In the last post, I suggested an urgent need to cancel certain federal student loans, including those of borrowers who have been caught in loan hell through no fault of their own and deserve to get their lives back.
I'm not the only one who knows something is very wrong in the Department of Education's collection priorities. Student Defense, in a new report, writes: "While the Department aggressively attempts to collect from borrowers,
institutions and their owners and executives walked away from more than a billion dollars
owed to taxpayers."
Action must be taken to cancel the loans of borrowers who have been victimized by the mistakes of others and have exhausted remedies without success. I'll illustrate with the examples of Marjorie Dillon and Charles Stewart.
Marjorie Dillon attended a public university but was not viewed as a student for whom a good financial aid package should be assembled. In fact, the package was so loan-heavy it may have been a message that the school would rather not see her enroll. This practice is one of the techniques of "enrollment management." When a newspaper reporter wrote up her story, for which she waived her privacy, she was $120,000 in debt and student loan collectors were threatening to ruin her grandmother financially, as well as her disabled father. She also had a toddler surviving on the WIC program, so four generations were at risk simultaneously.
The reporter also talked to the "vice president of enrollment" at Ms. Dillon's university. He made her records public, blamed her for missing application deadlines and coming in to the aid office on the day bills were due. He assured the reporter that the college had given her the required counseling at the time she took out loans. But anyone familiar with basic federal student aid regulations knows that her rights were violated — by my count, seven times. She should never have been placed in this situation by her school. When I looked up the biography of the vice president, I saw he was simultaneously consulting at an enrollment management firm which, through its parent company, was about to take the grandmother's house.
Then there is the case of Charles Stewart, who has given me permission to discuss his case. His student loans were mishandled not by design, but by neglect. When he tried repeatedly to get them straightened out over the years, he always got the same answer. Yes, there were mistakes, but there's nothing to be done about it.
I have seen the emails between Mr. Stewart and a Department of Eduction official who said the solution was for the loan guaranty agency simply to cancel the loans. But the guaranty agency, USA Funds, refused, even though such agencies were funded by borrowers and taxpayers precisely to resolve these matters. Incredibly, the Department official, rather than pushing back against USA Funds, advised Mr. Stewart to seek his own private counsel and sue the Department for cancellation. That also did not work, as the lawyer soon dropped the case because he took a job with a conflict of interest.
Not only should these two borrowers get relief, the institutions and individuals responsible for the situations should be disciplined.
Secretary Miguel Cardona has the statutory authority to resolve these kinds of cases through compromise and settlement, and to raise the bar as to what is expected of institutions and individuals who are part of the federal student financial aid system. And President Biden and both houses of Congress must back him up.
