Borrower's remorse.

• Author: Burd, Stephen
• Position: Borrower defense

THE OBAMA ADMINISTRATION PROMISED DEBT RELIEF TO THE VICTIMS OF PREDATORY FOR-PROFIT COLLEGES. THEN CAME TRUMP.

In 2006, Christina Hammond made a decision that she will regret for the rest of her life. She enrolled in the Grand Rapids, Michigan, campus of ITT Technical Institutes, a publicly traded chain of for-profit schools, to become an expert in computer network systems.

ITT, Hammond says, persuaded her to enroll by misleading her about her ability to find a job, transfer credits to other schools, and cover her costs with federal grants and loans alone. When she couldn't cover those costs, ITT pressured her to take out expensive private loans to remain enrolled. Hammond graduated with $104,000 in federal and private student loan debt and hasn't been able to get a job in her field. She is now working in a factory job she could have gotten before going to ITT and has defaulted on her loans.

Two years ago, Hammond thought she had found a way out: a once-obscure provision of federal law called "borrower defense," which authorizes the U.S. Department of Education to wipe out the debts of students who have been defrauded by their schools. Hammond filed her claim in September 2015--a full year before ITT collapsed under the weight of multiple federal and state investigations for deliberately defrauding students, shareholders, and the federal government, while raking in billions of dollars of federal financial aid every year.

Hammond was not alone. Spurred by the high-profile cases of Corinthian Colleges and other for-profit schools that were accused of defrauding students, thousands of borrowers had begun petitioning the Obama administration in 2015 to have their loans discharged. Under tremendous pressure from Democratic senators, consumer groups, and student activists, the administration vowed to provide borrower-defense discharges to students who had been harmed by predatory for-profit schools. "Where students have been harmed by fraudulent practices, I am fully committed to making sure students receive every penny of relief they are entitled to under law," then Secretary of Education Arne Duncan said in June 2015. "We will make this process as easy as possible for them, including by considering claims in groups, where possible, and hold institutions accountable."

But the administration didn't come close to meeting that goal. Instead, the Department of Education set up a laborious process that, until the last several months of 2016, moved at a snail's pace. While the administration ultimately managed to discharge about a third of the claims it received, it struggled with the unprecedented demand for relief. The department's slow progress left many borrowers and consumer advocates deeply discouraged--including Hammond, whose application for discharge has yet to be reviewed two years after she filed it.

Obama administration officials clearly expected that Hillary Clinton would win the presidency, and that her administration would build on the system they created to make the discharge process easier. Things, of course, didn't work out that way. Instead, the Trump administration has put a halt to the limited progress Obama made. Many borrowers who were pledged relief have yet to receive it, and in July the Education Department admitted to a group of Democratic senators that it hadn't approved a single application since Trump took office. Current Education Secretary Betsy DeVos has announced that she plans to rip up the Obama policies and write new rules that are all but guaranteed to be far friendlier to industry. Indeed, a former for-profit executive is helping lead the effort.

All of which means that people like Christina Hammond, victims of both unscrupulous corporations and slow-moving government, could be trapped in financial ruin.

Ever since the federal government began helping people pay for college, many for-profit schools have looked for ways to scam students and taxpayers. The Truman and Eisenhower administration investigated for-profit trade schools' exploitation of the original GI Bill. In the mid-1970s, Congress held hearings about how they were taking advantage of low-income students to get their hands...