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Appeals Court Nominee Shaped DeVos’s Illegal Loan Forgiveness Effort

A judicial nominee slated for a key Senate committee vote on Thursday helped devise an illegal Education Department effort to use private Social Security data to deny debt relief to thousands of students cheated by their for-profit colleges, according to a memo obtained by The New York Times.

The plan, outlined by Steven J. Menashi when he was acting general counsel under Education Secretary Betsy DeVos, was ruled by a federal judge to violate federal privacy laws. She ordered the department to stop the practice.

In the memo, President Trump’s appeals court nominee, who left the Education Department to join the White House legal team, outlined the department’s plan to use earnings data from the Social Security Administration to forgive only a small percentage of debts shouldered by 30,000 borrowers who attended Corinthian Colleges, a for-profit chain that the Obama administration found misled thousands of students. Corinthian’s collapse left its students and graduates with worthless degrees and mountains of debt.

In the previously unreported memo, Mr. Menashi wrote that Ms. DeVos had the discretion to determine how to respond to requests for relief, then boasted that the department had used Social Security income data: “The department utilized actual earnings data for borrowers maintained by the Social Security Administration.”

He also said her method was not subject to judicial review.

That proved untrue: Six months after a new partial-forgiveness policy was implemented, Magistrate Judge Sallie Kim of Federal District Court in San Francisco ruled that using the Social Security data violated the federal Privacy Act. Since then, the department has been entangled in a messy court battle, which recently resulted in Ms. DeVos being held in contempt of court and facing a $100,000 fine.

The fight has now become part of a broad effort to thwart Mr. Menashi’s confirmation to the United States Court of Appeals for the Second Circuit.

Eileen Connor, the legal director at Harvard’s Project on Predatory Student Lending, the group representing Corinthian students in the lawsuit, warned that “putting Menashi on the bench will be seen by government agencies as a green light to put their agenda above the rights of everyday Americans, and above the rule of law.”

“As we’ve seen time and time again, the only way for students to get a fair shake is not from the Department of Education, it’s through the courts,” she said. “Menashi has shown that in his view there is no role for the federal courts in reviewing, much less checking, executive action. This is a dangerous perspective for someone who could potentially hold a lifelong appointment to the federal appeals court.”

The White House did not respond to a request for comment.

The memo sheds light on the role that Mr. Menashi played in creating one of the Education Department’s most embattled policies, which has made it significantly harder for people to seek student loan forgiveness. The memo, in which Mr. Menashi outlined the legal bases for the new loan forgiveness calculation resting “on substantial evidence of the harm to borrowers,” informed a high-ranking official in the department’s student aid office that it superseded legal interpretation by the Obama administration.

In response to questions during his confirmation process, Mr. Menashi has maintained that he was involved in “all aspects” of the department’s operations, but in a hearing in September, he declined to answer specific questions about his efforts, prompting criticism from both Democrats and Republicans. At least one Republican senator, Susan Collins of Maine, said she would oppose Mr. Menashi’s confirmation, in part, because of his reluctance to answer questions about the specific policies he has influenced.

Other key Republicans on the Senate Judiciary Committee, such as Senator John Kennedy of Louisiana, also expressed reservations.

Mr. Menashi, a former law clerk to Justice Samuel A. Alito Jr. at the Supreme Court, has also drawn criticism for past writings on issues affecting the gay community, women and other minorities.

Mr. Menashi has expressed regret about the writings. But critics have also raised concerns about his role in rolling back students’ civil rights protections at the Education Department, where he was instrumental in overhauling regulations that govern how schools and colleges respond to complaints of sexual assault.

Last month, Senator Patty Murray, Democrat of Washington, sent a letter questioning Mr. Menashi about whether he helped Ms. DeVos “undermine protections” for student borrowers. She noted that his tenure overlapped with the lawsuit challenging the partial-forgiveness policy.

“I am concerned in light of your troubling record of working with Secretary DeVos to undermine protections for students who were cheated and defrauded by for-profit colleges,” Ms. Murray wrote.

The 11-page memo is dated Dec. 14, 2017, about a week before Ms. DeVos announced a new system for calculating loan forgiveness, using “average earnings” after college to determine whether Corinthian students suffered long-term economic harm. She said the new system would allow “harmed students to be treated fairly,” while protecting “taxpayers from being forced to shoulder massive costs that may be unjustified.”

The department halted use of the data after Judge Kim’s ruling. It had obtained the data from the Social Security Administration to implement another Obama-era regulation intended to force for-profit colleges to show that their degrees would lead to gainful employment.

In his memo, Mr. Menashi wrote that data obtained to hold for-profit colleges accountable could be repurposed to scrutinize their students. Mr. Menashi argued that the department was in a “unique position” to examine whether students had gone on to earn the salaries of other students in similar programs. He said a comparison of Corinthian students’ earnings determined that the schools “provided measurable value to students.”

Corinthian students argued that the department should not have been using the data for anything but the purpose it was requested for, and the judge agreed. Advocates for the students said the department’s consideration of whether students went on to do well despite being lied to by their colleges was not relevant, nor was it relevant that some obtained jobs that had nothing to do with what they had trained for.

But Mr. Menashi’s legal advice found a willing audience: Ms. DeVos has been clear that she did not want to grant full relief to students who claimed they were defrauded by colleges. She criticized the Obama administration’s approach as “free money.”

In a 2017 memo, unveiled in court filings, Ms. DeVos signed off on discharging the loans of 16,000 Corinthian students whose applications were approved under the Obama administration, but took the liberty of writing a message in the comments section of the form: “With extreme displeasure.”

Read the full article at The New York Times.