Kamala Harris has touted debt cancellation for defrauded students. But two years after cancellations were announced, some borrowers are still being harassed for payment.
Kamala Harris is justifiably proud of her work in shutting down fraudulent for-profit Corinthian Colleges while California attorney general, and helping to secure full debt relief for defrauded students while vice president. At last month’s Democratic National Convention, Nathan Hornes, one of those students, appeared onstage to thank Harris for this work. (Hornes spoke right before a board member of Corinthian Colleges, but that’s another story.)
Harris “stuck up for students, prosecuted Corinthian, and stood with us as we fought and organized for debt relief,” Hornes said. The debt cancellation, he added, “gave us back our futures.”
But although the debt relief was announced by the Department of Education more than two years ago, one of Hornes’s fellow Corinthian victims filed a lawsuit this week in superior court in Alameda County, California (Harris’s birthplace), alleging that her private loan servicer, the Missouri Higher Education Loan Authority (MOHELA), has not implemented the loan discharges. In fact, this student alleges along with others in a proposed class action lawsuit, MOHELA has failed to refund money due to borrowers, continues to report the canceled debt to credit bureaus, and insists on demanding payment on loans that have been extinguished.
“When the Corinthian group discharge was announced, it felt like a huge weight was lifted,” said Jaime Maldonado, a former Corinthian student and one of the lead plaintiffs in the case against MOHELA, in a statement. “They told us we didn’t have to do a thing and our loans would be canceled. Two years later, I’m still fighting for answers and the relief I was promised, wondering if this was just another trap.”
On paper, the Biden-Harris administration has forgiven $167.3 billion in student debt for nearly five million borrowers, according to numbers from The Washington Post. But actually ensuring that borrowers receive that debt relief depends heavily on the work of private loan servicers, which the Department of Education contracts to handle day-to-day management on its student loan portfolio. That includes MOHELA, which has repeatedly been accused of ineptitude in its servicing practices.
Last year, the Department of Education withheld $7.2 million in payments to MOHELA after finding that it failed to send timely billing statements to 2.5 million borrowers, causing 800,000 to fall into delinquency. The department also transferred one million loan accounts away from MOHELA in May. In February, the Student Borrower Protection Center published a trove of internal documents from MOHELA, alleging that “more than four in ten student loan borrowers MOHELA services have experienced a servicing failure since loan payments resumed in September 2023.”
The saga suggests that the government is more interested in sending out press releases touting student debt forgiveness than paying attention to the implementation process of whether the forgiveness actually gets to borrowers. That disconnect is especially debilitating in the context of the upcoming election, where this is one of the key parts of Harris’s record that she’s running on.
It also calls into question why the government outsources collection of student loan payments to private servicers that for years have continuously failed to follow prescribed guidelines or even the law. The Internal Revenue Service is one of the largest payment collectors in the world, with a dedicated track record of success in this area. Privatizing payment collection on higher-education loans would be unnecessary enough if the private companies actually did their jobs correctly; that they are being sued repeatedly over misconduct makes the situation ridiculous.
Connor, whose Project on Predatory Student Lending has filed multiple lawsuits to secure debt relief promised to students, was in the room when Harris announced the Corinthian loan discharges. “She needs to finish the job,” Connor said. “I think there are more direct ways to process discharges and deliver the relief to people. There is some red tape that can be cut through if someone is paying attention.”
