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Empire Justice Comments on Proposed Federal Student Loan Regulations

August 1, 2016


The Honorable John B. King Jr.
Secretary of Education
U.S. Department of Education
400 Maryland Ave, SW
Washington, DC 20202

Re: Docket ID ED-2015-OPE-0103; proposed rules to student loan regulations

Dear Secretary King:
Thank you for the opportunity to comment on the Department of Education’s proposed rules governing federal student loans. Empire Justice Center has extensive experience in successfully representing low income consumers in upstate New York.  As an organization committed to representing low income consumers, we offer these comments and recommendations and ask that the Department of Education meaningfully improve portions of the rules prior to implementation.

Empire Justice Center is a non-profit legal services organization with offices throughout New York State in Albany, Rochester, Westchester County, and on Long Island. Our mission is to protect and strengthen the legal rights of  poor, disabled or disenfranchised people in New York State through systems change advocacy, training and support to other advocates and organizations, and high quality direct civil legal representation. We focus on a number of issues affecting low income individuals and families such as health, public assistance, consumer and employment issues.

Our student loan practice substantially grew following the sudden closure of Everest Institute (“Everest”) located in Rochester, New York. This campus was home to the only Corinthian Colleges Inc. (“Corinthian”) school west of the Rockies. After the closing of Everest we were inundated with calls for help from former Everest students who were struggling to navigate the student loan discharge process. We found ourselves immersed in learning all we could about this process, and were shocked to find how challenging it was to navigate for a lay person. It is through this lens that we offer these comments.

Comments Regarding School Closure Discharges

Proposed Regulation §668.14(b)(32)

We applaud the proposed requirement that all institutions planning to close provide students with a discharge application and written explanation of the discharge. However, this proposal does not go far enough to provide displaced students with comprehensive assistance and an explanation of their right to debt relief. In our experience, many displaced students did not receive discharge information.  When they did, they found the information nonsensical and they had nowhere to turn for clarification and assistance.

Based on this experience, we urge the Department to ensure that a clearly identifiable, knowledgeable and accessible representative is made available on campus immediately after the impending closure is announced, to provide in-person, meaningful assistance to students displaced by school closures.  While we know that there was a Department representative on site, handing out school closure discharge applications within days of the Everest closure, with one noted exception, the Everest students we represented did not encounter that person. The one student that did interact with the Department representative did not receive advice or assistance, rendering the encounter essentially meaningless.
In addition, the Department should offer on-going assistance through the creation of a student loan discharge hotline and/or on-line computer chat, and hyper-links on the Department’s website directing students to assistance in their local communities. It is imperative that assistance be made available in multiple formats (telephone, smartphone apps, mail, in person and on-line), as we found many former Everest students do not own or have limited access to computers. 
Proposed Regulation §685.214(c)(2)

We commend the Department for taking steps to allow the discretionary discharge of loans by the Department where a student does not re-enroll in school within the 3 years after a school closure. However, this rule can be strengthened by making the discharge mandatory. Further, we strongly urge the Department to shorten the re-enrollment time period to 1 year instead of 3 years.  Strengthening this rule will reduce the burden on the borrower and significantly increase the number of borrowers that have access to their legal right to debt relief.

Proposed Regulation §673.33(g)(3)(iii), 62.402(d)(8)(iii) and 685.214(c)(2)

We strongly support the proposal which allows borrowers the right to appeal to the Department when closed school discharges are denied by guaranty agencies. The right to appeal is paramount due process right.  It provides qualified borrowers with a safety net for obtaining debt relief and also provides a framework for accountability of guaranty agency decisions.

Comments Regarding Defense to Repayment Discharges (DTR)

Empire Justice has signed-on to comprehensive comments that address the proposed rules to DTR discharges. We offer the following recommendation for the DTR discharge process based on our experiences in assisting students here in Rochester, New York.   Students in Rochester face a disadvantage in obtaining DTR discharges because they did not benefit from an official finding of fraud made by governmental agencies at their campus. There was never an investigation or subsequent finding of fraud conducted by the Department of Education or the New York State Attorney General. Therefore the majority of Rochester students are unduly burdened with the requirement that they individually provide evidence of fraud under New York State law to benefit from the DTR discharge process.

Recently, a small number of Rochester students became eligible to apply for the expedited DTR discharge process after the Department found that Everest Institute misrepresented job placement rates for some of their academic programs between 2010 and 2014. However, even these borrowers face tremendous proof issues under the current rules. Specifically, borrowers still have to prove their enrollment date by providing transcripts or registration materials from Everest Institute, which is now closed. Most students do not know where or how to obtain transcripts from the closed institution. 

We were fortunate to learn that Bryant & Stratton College (“B&S”) has assumed custodial responsibility for Everest student records. We recently learned from B&S that the physical transfer and organization of the Everest records is currently taking place, well over a year after Everest closed. Even when the few fortunate students learn that their transcripts are available at B&S, requests take anywhere from 30 days to 60 days to process, assuming the actual transcripts can be located. We believe that it is unduly burdensome and unnecessary to require students to obtain these documents in order to apply for an expedited DTR discharge when the Department can easily establish enrollment date through federal student loan documents.

Therefore, to lessen the burden placed on these borrowers, we strongly urge the Department to accept more flexible and adaptable forms of proof from borrowers. We recommend that the Department accept a simple affidavit in which the borrower states that he or she enrolled during a specified time period instead of requiring transcripts or registration documents. A borrower’s affidavit of enrollment provides sufficient proof of enrollment where the Department can readily confirm the enrollment date from federal student loan records, which are in the Department’s control.

We appreciate the opportunity to comment on these proposed regulations. Please do not hesitate to contact me should you have any questions in regard to these comments.

For more information, please contact:

Maggie Robb

Empire Justice Center
Telesca Center for Justice
One West Main Street, Suite 200
Rochester, NY  14614

(585) 454-4060
(585) 454-2518