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Veterans and Predatory Student Lending

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Predatory Student Lending: What Veterans Need to Know

The federal government is attempting to settle a lawsuit against the U.S. Department of Education over predatory student lending. If “preliminary approval” is granted by a deadline issued for the end of July, it may result in the government paying $6 billion to compensate the students who were unfairly shut out of a government program designed to hold for-profit schools and other higher learning institutions accountable.

How Did This All Get Started?

In 2021, Forbes Magazine reported on a class action lawsuit against the United States Department of Education regarding changes to the Borrower Defense To Repayment Program made under Trump appointee Betsy DeVos.

That program was created to offer student loan forgiveness to those who attended colleges and for-profit schools but reported being misled, defrauded, or otherwise harmed by the institution. The Forbes article states that under DeVos, the program was instead redesigned to create limits to that forgiveness that may have gutted the program.

Mass Denials of Student Loan Forgiveness?

According to the Forbes report, DeVos may have personally approved “mass denials” of applications to the program. This, Forbes alleges, at the same time the agency publicly claimed all applications were being reviewed accurately. National Public Radio aired an interview and update on this issue in June 2022, noting the Department of Education (DOE) is settling the lawsuit to nearly $6 billion in financial relief to affected students.

What This Means for Veterans

What does all this have to do with veterans’ benefits? There are actually two separate concerns at work. Some veterans used GI Bill benefits at schools that closed, misled students, or otherwise abused the GI Bill system. But other veterans may have applied for student loans instead. What happens to a veteran who paid for their education at a for-profit or other school that didn’t do its job?

Betsy DeVos’s actions while serving as the head of the Department of Education may have prevented these veterans from getting the full measure of the GI Bill benefits. One of those actions? Repealing a requirement that the schools show a benefit for the education money spent there.

NPR’s Quil Lawrence filed a news story on this issue which notes, “the Trump administration’s education secretary, Betsy DeVos, repealed rules that required schools to prove their degrees led to gainful employment.”

The DeVos DOE And her department fought this class-action lawsuit, but it has since been settled in a U.S. District Court. That means the DOE will send “billions of dollars of automatic relief” according to NPR to some two hundred thousand borrowers associated with the class action lawsuit. That money is not explicitly earmarked for veterans or those who used the GI Bill.

This settlement does not mean all defrauded veterans are getting their money back–only those who participated in the class action suit may be awarded compensation. But if you are entitled to GI Bill benefits and did use yours at a for-profit school that closed, defrauded you, or otherwise misused federal GI Bill funds, you may have recourse with the Department of Veterans Affairs.

Restoration of GI Bill Benefits

Those who want to use GI Bill education benefits to attend a for-profit school or any other program may have the option to apply for restoration of GI Bill benefits if the school closes or is no longer approved to receive GI Bill funds.

You could qualify for full or partial restoration of the benefits, depending on circumstances. This restoration is not automatic, must be applied for, and approval of your claim is not guaranteed.

When you apply, you will be considered for restoration. If you qualify your entitlement is restored “immediately” according to the VA official site.

The VA does add a caveat; if your program stopped after 1 August 2021, you must enroll in a new program and see what hours from the old school your new one might accept. The VA will make a determination following those decisions by your new school.

How to Apply for GI Bill Restoration of Entitlement

To apply, complete the VA Form 22-0989, Education Benefit Entitlement Restoration Request Due to School Closure or Withdrawal. Submit the form online or submit by mail to:

Muskogee Regional Processing Office
P.O.Box 8888
Muskogee, OK 74402-8888

The Bottom Line

The official site of The Project on Predatory Student Lending discussed this case upon its resolution, noting, “…students who experienced fraud should not be required to pay back federal loans that should never have been made by the Department in the first place”.

The Project on Predatory Student Lending isn’t just a grass-roots student rights group; it is part of the Legal Services Center Of Harvard Law School.

The official site adds, “Since Betsy DeVos repeatedly ignored these students’ legal rights, the only way they could have their voices heard was through the courts. The students in this case continue to press the current administration to recognize their established rights.”

Those who used GI Bill funds at such colleges may or may not have had the ability to join this class action lawsuit, but those who have been defrauded of their VA education benefits do have recourse through the VA as mentioned above.

That said, veterans who feel their concerns are not being addressed may wish to contact The Project On Predatory Student Lending to see if there are any class action cases that might relate to their own circumstances.




About the author

Editor-in-Chief | + posts

Editor-in-Chief Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter/editor for Air Force Television News and the Pentagon Channel. His freelance work includes contract work for Motorola, VALoans.com, and Credit Karma. He is co-founder of Dim Art House in Springfield, Illinois, and spends his non-writing time as an abstract painter, independent publisher, and occasional filmmaker.