New guidelines proposed by Education Secretary DeVos would make it harder for students to get their loans forgiven.
The Trump administration proposed new guidelines in July that would make it more difficult for students to get student loan forgiveness even from schools that have allegedly defrauded them.
Education Secretary Betsy DeVos highlighted the proposed changes, which were lauded by for-profit entities in the school industry but drew the ire of consumer watchdog groups. Here’s a closer look at the proposed changes.
What is in the Proposal?
The new rules, which are meant to take the place of rules that were drafted during the Obama administration but haven’t taken effect, state that borrowers can only be eligible for student loan relief if they can show a school deceived them on purpose. That deceit would have to cause them to attend the school and seek loans.
That’s a higher burden of proof than the Obama rules called for when drafted in 2016. This was during the period when students were left with student loans following the closure of Corinthian Colleges and ITT Technical Institute, both for-profit schools.
But DeVos said the proposal will protect the students and gives schools guidelines they need to follow to stay out of trouble.
“Our commitment and our focus has been and remains on protecting students from fraud,” DeVos said in a press release.
The new proposal puts more of the burden on the students, stating they should do their research to make sure they are choosing a quality school.
“Postsecondary students are adults who can be reasonably expected to make informed decisions if they have access to relevant and reliable data about program outcomes,” the Department of Education said, according to the Tampa Bay Times.
These new rules, however, wouldn’t apply to old loans – they would only be applicable for those acquired as of July 1, 2019, and later. The measure is expected to save almost $13 billion in a decade in comparison to the rules developed by the Obama administration. The savings mainly come from loan relief that wouldn’t be given to borrowers.
Under the new rules, schools would have the chance to defend their reputations against any alleged fraud claims. Students wouldn’t be able to sue the schools – instead, they would have to enter into arbitration agreements. That’s one measure that is different from the Obama rules.
The Reaction to the Proposal
Student loan watchdog groups said the rules make it difficult for borrowers to seek any kind of relief.
“It encourages abusive and predatory institutions to continue to rip off students with impunity, while slamming the door on the debt relief that Congress has instructed the department to provide to cheated students,” Toby Merrill, who serves as director of Project on Predatory Student Lending at Harvard University, said, according to the Tampa Bay Times.
But some Republicans and for-profit colleges viewed the proposal in a favorable light. Steve Gunderson, president and CEO of Career Education Colleges and Universities, said the Obama rules greenlighted claims of fraud while these rules allow a closer look.
Sen. Lamar Alexander, a Tennessee Republican, said these new rules will protect taxpayers from having to pony up money to forgive loans that have unproven fraud claims.
The department is currently seeking public comment into late August on the proposed changes.
Author: Shannon Serpette
Student Loan Guides
Student Loan Reviews