Los Angeles, Calif. – The Legal Aid Foundation of Los Angeles (LAFLA) has filed a lawsuit in federal court against Miguel Cardona, Secretary of the U.S. Department of Education. The complaint alleges that the Department presumptively denies loan cancellations to vulnerable low-income borrowers who have not earned high school diplomas, even when they provide sufficient evidence to show that their schools falsely certified their eligibility for financial aid. Furthermore, the complaint alleges that Department routinely denies these applications without due process of law and without considering the evidence provided by the borrowers, in violation of federal law. 

In 2011, plaintiff Evelyn Lara enrolled in an ultrasound technology program at Career Institute, a for-profit college, in Long Beach. Although Ms. Lara told the school’s recruiters that she had only completed 10^th grade, Career Institute fraudulently obtained over $17,500 in federal student loans on her behalf after instructing her to complete an “ability-to-benefit” (ATB) test using answers that it illegally provided. The Higher Education Act (HEA) requires colleges to administer ATB exams before they may obtain federal financial aid on behalf of non-high school graduates. This long-standing requirement was enacted by Congress to prevent schools from preying on vulnerable students who may lack the prior education necessary to succeed in college programs. After an extensive Senate investigation revealed widespread abuse of this requirement by for-profit colleges, Congress amended the HEA to mandate that the Department discharge the student loans of borrowers harmed by ATB fraud. 

Like many other borrowers harmed by such schemes, Ms. Lara, a single parent of four, has never had steady work and has struggled to repay her student loans. She was unaware that she was eligible for student loan relief until she visited LAFLA. In 2023, she applied for the discharge of her loans by submitting an application and supporting evidence. Although this documentation showed that she met all the legal requirements under the HEA, the Department denied Ms. Lara’s application with a vague boilerplate notice that failed to explain how or why her application and evidence was insufficient, and an ambiguous demand for additional documentation from Career Institute. Ms. Lara quickly appealed, in part on the grounds that she was unable to obtain any records from Career Institute because it had closed in 2016. The Department denied her appeal. 

“Ms. Lara has experienced years of financial hardship for student loans she should not have to repay. The Department’s blatant failure to review her application under the procedures required by law belies its stated commitment to providing relief for borrowers harmed by for-profit school fraud,” said Robyn Smith, a senior attorney at LAFLA. “While it has announced discharges for many harmed borrowers under other federal programs, it continues to impose impossible evidentiary requirements on vulnerable non-high school graduates who schools falsely certified their financial aid eligibility.” 

In addition to relief for her own student debt, Ms. Lara seeks an order compelling the Department to cease engaging in illegal evaluation and denial procedures pertaining to false certification discharge applications from similarly defrauded student loan borrowers. A copy of the complaint is available here.

Students who believe they may have been similarly defrauded may contact the Legal Aid Foundation of Los Angeles at 800-399-4528 or www.lafla.org.