Massachusetts AG sues Department of Education for failure to discharge loans

Courts State Issues State Attorney General Department of Education For-Profit College Student Lending

On October 22, the Massachusetts attorney general filed an action in the U.S. District Court for the District of Massachusetts challenging the U.S. Department of Education’s (DOE) continued collection of federal student loan debt incurred by over 7,000 individuals to attend a now closed for-profit college. The complaint alleges that, in 2015, the attorney general submitted an application to the DOE on behalf of the individuals who attended the for-profit school to have their federal loans forgiven due to the institution’s allegedly fraudulent conduct. The attorney general asserts that its application for loan discharge was supported by evidence of the institution’s various wrongful conduct towards Massachusetts students, and its submission established a defense to the enforceability of the underlying federal student loan debt. However, the complaint asserts that the DOE did not grant the requested loan relief and instead has continued collection efforts on debts subject to discharge under the attorney general’s application. The attorney general is seeking an order to set aside the DOE’s decision to continue collection efforts as “arbitrary and capricious” in violation of the Administrative Procedure Act and to declare that Massachusetts borrowers have established a defense to repayment of their federal student loans.