With Student Loan Lawsuit, Grewal Again Takes On Trump Administration

John Reitmeyer | September 18, 2019 | Education
AG alleges federal Department of Education denies access to data that would help the state address fraud by loan processors

student debt
The latest lawsuit filed by New Jersey’s attorney general against the Trump administration accuses the federal Department of Education of limiting access to records that can aid state investigations into firms and institutions that commit student-loan fraud.

The suit announced by state Attorney General Gurbir Grewal on Tuesday also alleges a “pattern and practice of shutting down cooperation and information sharing with state law enforcement agencies.”

Grewal is asking a federal court to compel the DOE to turn over information that his office has been seeking for more than a year, as well as an explanation of the basis for breaking with what had been the federal government’s routine practice of sharing such information.

Grewal was also one of 17 state attorneys general to sign a letter to DOE Secretary Betsy DeVos earlier this week complaining about continued attempts to block the sharing of student-loan data. That information is “critically important to federal and state law enforcement agencies’ efforts to combat widespread fraud in the higher education finance sector,” the letter said.

“Recent actions by the U.S. Department of Education demonstrate that its current leadership is more committed to shielding student loan servicers and predatory schools from scrutiny than it is committed to protecting students from misconduct,” Grewal said in a statement released by his office.

A growing mountain of student debt

The complaints being aired by Grewal and the other state attorneys general come as student indebtedness has skyrocketed. The New York Federal Reserve has estimated more than 40 million people have taken on a combined $1.6 trillion in student loans, with more than $106 billion borrowed in 2017 alone.

In New Jersey, more than 1 million people had student-loan debt totaling more than $43 billion as of the end of last year, according to the nonprofit Student Borrower Protection Center. A recent survey of members of the New Jersey Society of Certified Public Accountants also found that a majority believe that student-loan debt has reached “crisis levels” in New Jersey, causing many to put off home-buying or saving for retirement. The group has urged federal lawmakers to take action to help ease the burden.

State lawmakers have also raised concerns about predatory student-lending practices in recent years, and they’ve responded by establishing a student-loan ombudsman and by ramping up financial-literacy training for students as young as middle schoolers.

Meanwhile, Grewal’s office and other law-enforcement agencies have also been targeting fraud committed by student-loan servicers and for-profit schools. In fact, last year Grewal’s office took action on behalf of students who were mistreated by now-defunct Corinthian Colleges, and it also accused the federal DOE of ceasing approval of valid student-loan relief applications. “On January 20, 2017, the Department abruptly halted granting any new borrower-defense claims — even as the backlog of Corinthian claims grew to over 50,000,” the lawsuit read.

The latest legal case filed by Grewal’s office alleges the federal DOE is preventing state-level law-enforcement agencies from gaining access to student-loan information and databases controlled by the federal government that can be used to boost fraud prosecutions. They include what’s known as the DOE’s Common Origination and Disbursement (COD) records system, according to the letter sent to the department this week by Grewal and the attorneys general from 16 other states, including Connecticut and New York.

“Access to student loan information — including data in the COD system — is critically important to federal and state law enforcement agencies’ efforts to combat widespread fraud in the higher education finance sector,” the letter said.

Suit alleges failure to respond to FOIA request

Credit: Gage Skidmore/flickr
U.S. Secretary of Education Betsy DeVos
The lawsuit announced yesterday stems from a formal request for information that Grewal submitted last August under the federal Freedom of Information Act. The suit accuses the federal agency of not complying with the request, including a FOIA requirement that such requests be responded to within 20 business days.

“As of the date of this filing, the Department has not produced any records in response (to the request). Nor has it objected to the request or identified any ground for withholding responsive material as exempt from production under FOIA,” the lawsuit says.

“Thus, Defendant has violated FOIA by failing to provide Plaintiff with the determination required by FOIA within the statutory time frame, and by failing to make the responsive records ‘promptly available,’” the suit says.

The suit also seeks a court order requiring the DOE to disclose all requested records, including those showing the basis for withholding student-loan information that has in the past been shared. It also seeks attorney fees and “any other relief this Court deems appropriate.”

Grewal, nominated by Gov. Phil Murphy in 20128, has not been shy about taking on the Trump administration in court, filing lawsuits on issues like immigration, the environment and federal and state taxation.

Explaining his approach to such lawsuits earlier this year while appearing before the Assembly Budget Committee, Grewal said the Trump administration has attempted many questionable rulemaking changes.

“The way you challenge the rollback or changes in federal rulemaking is through the Administrative Procedures Act,” Grewal said, noting that historically the federal government has prevailed in such cases 70 percent of the time.

“This administration, it’s at less than 6 percent, which suggests to me that the rulemaking that’s being rolled back is being done in a way that is arbitrary and capricious,” he told the lawmakers.