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Biden administration backs Betsy DeVos in student loan lawsuit

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Former Trump administration Education Secretary Betsy DeVos is involved in a lawsuit over student loans and President Biden’s Department of Justice is helping her fight a subpoena. This comes as the president faces increasing pressure from his own party to take on student loan forgiveness. CBS News reporter Kate Smith joined “CBSN AM” with the latest.

Video Transcript

ANNE-MARIE GREEN: Former Trump administration education Secretary Betsy DeVos is involved in a lawsuit over student loans. And President Biden's team is helping her fight a subpoena. About 160,000 former students at for-profit colleges claim that they were scammed and they accused DeVos of not acting quickly enough to address their loan forgiveness concerns. DeVos resigned the day after the deadly Capitol riot and is no longer a defendant in the case. But the attorneys for the students say they still want to hear from her.

So Kate Smith has been following this fight for student loan forgiveness and she's joining us now. So this is like a weird situation. It would be weird for an ex-education secretary to be subpoenaed and testify anyway. But then you add on this other layer of the current administration backing her in her fight to not appear in court. So Kate, but let's go back to the beginning. Let us talk about this ongoing lawsuit, what is being alleged in this lawsuit, and why the Biden administration agrees that Betsy DeVos should not have to testify.

KATE SMITH: So Anne-Marie, this is a lawsuit-- it's a class action lawsuit, like you said, brought by about 160,000 different students who all took out student loans, for-profit student loans, to attend college. And they say they were scammed. So they are filing a class action lawsuit regarding that saying, you know, these loans-- excuse me-- are essentially fraud because the education that they received wasn't at the caliber of what they were told it would be. Many of these colleges weren't actually accredited.

And therefore, these loans would not really be-- they would be null in the sense that any kind of debt that you take out for a product that turns out to be not-- excuse me-- turns out to be fraudulent, those loans-- all of a sudden the validity of those loans-- and this isn't just student loans. This is debt anywhere. All of a sudden, the validity of those loans actually comes into question.

So that's what this class action lawsuit is all about, is whether or not the education that they received would be so against what these students believed they were getting when they took out massive amounts of loan, Anne-Marie. It's really, really staggering numbers. And whether the education wasn't what they were sold.

- So essentially, they're saying, we didn't get what we paid for. It's fraudulent. And now we are buckling under these heavy duty loans. And there is an option for loan forgiveness. And I think as I understand it, what they are alleging is that many people apply for loan forgiveness. And then the Trump administration sort of slow rolled the process and took a really long time to hear back. In some cases, they were rejected outright and they couldn't understand why.

This would all have been happening under Betsy DeVos' watch. So what are they hoping to hear from her? And what would be the impact on their lawsuit if she does not testify?

- So that's where it gets thorny. They're alleging not completely that the education is the problem, but also the way the Trump administration handled their concerns. Now, I should mention that for profit colleges-- now, students who attend those colleges, students who take out loans for those colleges-- their ability to refinance those loans, have options with those loans, they're much fewer than students who take out debt to attend nonprofit universities, and therefore, student loans that are issued through the Department of Education.

So it's important to note that these are two different kinds of debt, two different kinds of education processes. So for these for profit, again, like you mentioned, they are saying that it didn't happen quick enough. So what they want to hear from DeVos and from-- kind of getting some insight into the former administration-- why did it take so long? Why was there no real priority about helping these students when, in these limited circumstances, when they can indeed forgive loans, get some reduced, why wasn't there the help and the support? And why wasn't this a priority?

So that's what they're hoping to hear. Whether or not she testifies, I'm not sure how much of a difference it will make at the end, because this kind of case and class action lawsuits, the way these happen, they're not expecting the DeVos of those cases to testify. So whether or not she testifies, they will have some light at the end of the tunnel, some potential success down the road, again, whether or not DeVos does decide to participate.

ANNE-MARIE GREEN: Mm-hmm. So this whole idea of student loan forgiveness, you know, there was a lot of talk about it during President Biden's-- while he was campaigning, rather. On his first day in office, the president paused federal student loan payments through September because of the pandemic. But during a town hall meeting last night, he kind of pushed back on a demand from members of his own party to use executive power to step up student loan forgiveness.

You know, some people have called the student loan issue in this country almost a crisis, that people are buckling under the weight of having to pay back these student loans. Sometimes it's 20 and 30 years after they graduated from college, they're still paying off these loans. But why is the president against this proposal, this idea of expanding student loan forgiveness?

KATE SMITH: So President Biden comes from a more old-school Democrat point of view. And he's kind of finding himself at odds with these newer members, these progressive members of Congress. And so when Biden was on the campaign trail, he suggested $10,000 of student loan forgiveness via congressional action. Now, within weeks of his inauguration, these progressive members of Congress come to him with virtually a proposal that had nothing to do with what he wanted, Anne-Marie. It was $50,000 and it was via executive action.

So already in the first weeks of his presidency, you're seeing President Biden already at odds with these progressive members of Congress, people like Senator Warren, Chuck Schumer, these kinds of folks that you're frequently hearing about these more progressive ideas of the Democratic party. But that's not a part of the Democratic Party that Biden has historically been a part of.

So it was interesting to see these progressives came out with a plan that had virtually very little in common with what Biden had signaled that he'd be happy to do. But what you have seen from the White House is a willing to at least listen. So within days of that proposal coming out, you did see his press secretary saying that, OK, we will look into this. We will see if there's any sort of legal action that we can take. Because Anne-Marie, at the end of the day, the White House isn't even sure if they have legal standing to be able to do this. So not only are you looking at potential unwillingness, but also potentially it just might not be legal.

ANNE-MARIE GREEN: It's all really interesting. And I know it's going to be an ongoing conversation. Obviously we're in the middle of a pandemic. Some people may argue, is this really the time to start talking about wholesale loan forgiveness, which is sort of a massive project? But I'm sure we will talk to you again, Kate, about this topic. Thank you so much.

KATE SMITH: Thanks for having me, Anne-Marie.