Letter to Senator Durbin regarding our 2017 report titled, "Federal Student Aid's Borrower Defense to Repayment Discharge Process."

Published by the Department of Education, Office of Inspector General on 2018-06-06.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                        OFFICE OF INSPECTOR GENERAL

                                                                                                  THE INSPECTOR GENERAL

June 6, 2018

The Honorable Richard Durbin
United States Senate
711 Hart Senate Office Building
Washington, DC 20510

Dear Senator Durbin:

Thank you for your letter of May 23, 2018, requesting information from the U.S. Department of
Education Office of Inspector General on our December 2017 report titled, "Federal Student
Aid's Borrower Defense to Repayment Discharge Process." Attached you will find our responses
to your questions.

If you have any additional questions or need more information, please do not hesitate to
contact me directly at (202) 245-600, or have a member of your staff contact our Congressional
Liaison, Catherine Grant, at (202) 245-7023.


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Kathleen. S. Tighe
Inspector General
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cc: The Honorable Betsy Devos, Secretary, U.S. Department of Education

                               400 MARYLAND AVENUE, S.W., WASHINGTON, DC 20202-1510
               Promoting the efficiency, effectiveness, and integrity ofthe Deportment's programs and operadons.
           U.S. Department of Education Office of Inspector General
      Response to Senator Richard Durbin Regarding OIG Report Titled,
  "Federal Student Aid's Borrower Defense to Repayment Discharge Process"
                                June 6, 2018

1. What additional outcome data for the processing of borrower defense claims did
   Federal Student Aid (FSA) provide to your office on October 26, 2017,. as noted in
   footnote 5?

   The footnote refers to an updated "Review Ready Spreadsheet" that FSA provided to us
   on October 26, 2017. The Spreadsheet specified the general status of each claim as
   approved, pending, or ready for review as of October 10, 2017.

2. The report indicates that FSA's Borrower Defense Unit (BDU) reduced contractor staffing
   by more than two-thirds from November 2016 to September 2017. Did FSA provide a
   rationale for this decrease in staff, even as the number of claims mounted?

   FSA's BOU did not provide a specific rationale for the decrease in staff.

3. With regard to the category of borrower defense claims related to ITT Tech guaranteed
   employment misrepresentation noted on page 10, did FSA maintain legal memoranda or
   other documentation for these findings that indicate to how many potential borrowers
   and states such claims would apply?

   FSA's BOU maintained one legal memorandum related to misrepresentations of ITT
   guaranteed employment. The memorandum applied to only the California locations, but
   did not indicate the number of potential borrowers. FSA's BOU did not provide
   documentation for ITT guaranteed employment misrepresentation claims that indicated
   the number of potential borrowers or the states where they were located.

4. According to your analysis of unique claims that did not fall within one of BDU's seven
   established categories, "[a]s of January 20, 2017, BDU had identified additional
   categories of claims warranting further research." According to FSA, how many
   additional categories of claims had BOU identified?

   FSA's BOU stated that with respect to Corinthian schools, it had started research and
   analysis for five additional categories. With respect to schools other than Corinthian, FSA
   was in the processes of gathering and reviewing evidence.

5. The report notes on page 16 that the further research into additional categories of
   claims was "placed on hold." According to FSA, who initiated the halt to this research?

   FSA's BOU stated that in early 2017 the Enforcement Unit was instructed not to continue
   developing new memoranda on additional categories of claims at the direction of the
   Acting Under Secretary and the Review Panel.

6. What explanation was provided by FSA in its decision to halt the BOU research into
   additional categories of claims, if any?

   FSA's BOU stated that it had been instructed not to continue developing memoranda on
   whether additional categories of claims qualify for discharge because the borrower
   defense policies were being reviewed with the change in administration.

7. On November 14, 2017 at the opening session of the current borrower defense
   rulemaking, then Acting Under Secretary Jim Manning stated: "The Department is also
   working to adjudicate pending claims related to other schools and we are making
   progress on that front. However, I will admit that we're not as close as we are with the
   Corinthian claims... Once Corinthians adjudications begin our work on other claims will
   gather momentum." Based on OIG's assessment that additional research into claims
   was placed on hold, was Mr. Manning's statement of November 14 accurate?

   We do not know which "other schools" Mr. Manning was referring to in his statement.
   We did not analyze data outside of our review's scope of June 2016 through July 2017.

8. On page 21, the report notes that as of September 2017, FSA was testing a claims
   management tool. Did FSA indicate when development of this tool commenced and
   when it is expected to be operational?

   FSA's BOU did not provide definitive information on when the development of the claims
   management tool commenced or when it is expected to be fully operational. The tool
   was in development when we began our review.

9. Does the development of the claims management tool indicate to OIG that FSA was
   responsive to the need to further refine BOU processes for handling claims?

   Per our response above, the claims management tool was in development during the
   time period of our review, so we did not analyze it. But, with that said, the development
   of the tool would appear to reflect a recognition by FSA that it needed a better capacity
   to manage claims.

10. Which political appointees from the Obama Administration that were involved in
    writing, or received, the legal memorandums referenced in the report did you interview,

   We did not interview political appointees from the previous administration because it
   was not necessary to achieve the objectives of our review. The objectives were to {1}
   determine FSA's policies and procedures over its Federal student loan borrower defense
   loan discharge process, (2) determine the documentation FSA maintains to support its
   borrower defense loan discharge decisions, and (3) determine the outcomes of FSA's
   borrower defense loan discharge proceedings. The objectives of our review did not
   include reviewing the development of the legal memoranda or the decisions made in the

11. The current appointees of this Administration have repeatedly framed its borrower
    defense policies in reference to supposed shortcomings of the prior Administration. For
    example, again on November 14, 2017, at the opening session of the borrower defense
    rulemaking, then Acting Under Secretary Jim Manning stated "the Secretary also
    remains focused on working through pending claims. Unfortunately, she inherited a
    difficult situation, one where there was inadequate infrastructure in place to properly
    adjudicate claims." Did OIG consider the intent of Secretary DeVos' request for this
    review when deciding on the scope and objectives for the review?

   No. In keeping with our mission, we independently established the review's objectives
   and scope, and we conducted the review in accordance with the Quality Standards for
   Inspection and Evaluation issued by the Council of the Inspectors General on Integrity
   and Efficiency. These standards require us to exercise reasonable care and diligence and
   to observe the principles of serving the public interest and maintaining the highest
   degree of integrity, objectivity, and independence in applying professional judgment to
   all aspects of our work.