The Legal Aid Foundation of Los Angeles (LAFLA) announced this week their filing of a federal lawsuit against the U.S. Department of Education (ED) Secretary Miguel Cardona, challenging what it calls the department’s “presumptive denial” of loan forgiveness for vulnerable borrowers who attended for-profit colleges. The lawsuit, filed on behalf of low-income borrowers without high school diplomas, contends the department routinely dismisses loan discharge applications from defrauded students without due process and in violation of federal law.
The complaint highlights the case of Evelyn Lara, a single mother of four, who enrolled in an ultrasound technology program at Career Institute, a for-profit college in Long Beach, in 2011. Lara, who had not completed high school, informed the school’s recruiters of her educational background. Despite this, the college allegedly facilitated her federal student loans — amounting to over $17,500 — by instructing her on how to pass an “ability-to-benefit” (ATB) test using answers it provided illegally.
Under the Higher Education Act (HEA), colleges must administer ATB exams to secure federal financial aid for non-high school graduates. This provision is intended to protect individuals lacking prior education credentials from being targeted by unscrupulous schools. Following a Senate investigation that uncovered widespread fraud in ATB certifications, Congress amended the HEA, requiring loan forgiveness for borrowers impacted by ATB fraud.
According to LAFLA, Lara only discovered her eligibility for loan relief in 2023 when she consulted with the foundation. She applied for a loan discharge, submitting evidence that, under the HEA, demonstrated her eligibility. However, the ED denied her request, issuing a vague response that failed to clarify the reason for denial and demanded additional documentation from the Career Institute, which had closed in 2016. An appeal from Lara, citing her inability to retrieve records from the defunct institution, was subsequently denied.
“Ms. Lara has faced years of financial hardship over student loans she should not have to repay,” said Robyn Smith, senior attorney at LAFLA, in a press release announcing the lawsuit. “The department’s refusal to evaluate her discharge application properly contradicts its stated commitment to aiding borrowers harmed by for-profit school fraud.”
The lawsuit seeks debt relief for Lara and a court order mandating that ED cease what LAFLA describes as “illegal evaluation and denial procedures” for borrowers affected by false certification. The case underscores the struggles faced by defrauded students and advocates for transparency and accessibility in the loan discharge process for all impacted borrowers.
