Lawsuit Alleges Government Illegally Seizes Tax Refunds From Student Loan Borrowers

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For the past few years, the government has been working to collect Tamara Blanchette’s student loans – by seizing some of the money she receives from her tax refund.

But it’s a debt the government shouldn’t collect in the first place, according to a new lawsuit.

The lawsuit, filed on behalf of Blanchette and similar borrowers, alleges that Betsy DeVos and the Department of Education are collecting debts that are not legally enforceable.

This is because the department knows that Blanchette and other students who enrolled in the criminal justice program at the Minnesota School of Business, a former for-profit college chain, were defrauded by the school when they went. are enrolled in the program, according to court documents.

The lawsuit, filed on behalf of Blanchette and similar borrowers, alleges that Betsy DeVos and the Department of Education are collecting debts that are not legally enforceable.

Borrowers who have been defrauded by their schools have the right to be paid off their debt.

“There is this group of students that the Department of Education knows about who have been defrauded,” said Robyn Bitner, a lawyer with the National Student Legal Defense Network, who represents Blanchette. “Although he knows they were defrauded, the ministry decided to collect them.”

The education ministry declined to comment on the pending litigation. An attorney representing the Minnesota School of Business did not immediately respond to a request for comment on the allegations.

The lawsuit is the latest to highlight the government’s extraordinary powers to collect student debt – including the garnishment of borrower wages, tax refunds and Social Security checks – and the difficulty borrowers have to mitigate. these powers, even if they are entitled to them. . Borrower advocates and even Massachusetts Democrat and presidential candidate Senator Elizabeth Warren have complained for years that the government collects student loans that are not legally enforceable because borrowers have been defrauded.

Borrowers and advocates also alleged that the government was illegally collecting debts they were entitled to pay due to a disability.

In Blanchette’s case, the Department of Education had upheld and expanded state court findings that her school had distorted the ability of students enrolled in its criminal justice program to obtain employment and transfer their credits. , ultimately prohibiting the school from accessing federal financial aid, according to court documents.

The lawsuit is the latest to spotlight the government’s extraordinary powers to collect student debt, including garnishing borrower salaries, tax refunds and social security checks.

Blanchette experienced these tactics firsthand, according to the prosecution. When Blanchette started taking classes at the Minnesota School of Business in 2009, she hoped the degree – and the thousands of dollars she borrowed to make it possible – would help her start a new life.

The waitress and single mother wanted to become a probation officer and a school official promised her that her associate’s degree program in criminal justice would help her achieve that goal, according to court documents.

But in Minnesota, probation officers must have at least a bachelor’s degree. At the time, the school did not offer a bachelor’s degree program in criminal justice, according to the lawsuit. In addition, the school representative told Blanchette that she could easily transfer her credits to another school, statements the Department of Education later found to be inaccurate.

By 2015, Blanchette quit school, resumed her job as a waitress and defaulted on her student loans, which in January 2019 stood at $ 29,418 plus nearly $ 6,000 in collection costs, according to court documents.

Despite knowing she was a victim of fraud, the government continues to collect her debt, including taking at least $ 1,906 from her tax refund in 2017, according to the lawsuit.

“The evil is going on,” Bitner said.

Blanchette’s story is just one of the thousands of borrowers facing challenges in the wake of the for-profit college collapse. In recent years, several for-profit college chains have collapsed amid allegations they misled students about placement and graduation rates.

Under pressure from activists, the Obama-era Department of Education implemented a process that defrauded borrowers could use to pay off their debt. DeVos’ Department of Education tried unsuccessfully to rewrite the regulations governing this process, known as the Borrower’s Defense. Meanwhile, requests for debt cancellation, which the ministry must approve, languished at the agency.

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