Rules to help defrauded students clear loans being revised

The AGs see it differently, noting that the rules "provide critical protections for federal student loan borrowers against misconduct by abusive schools and colleges", and create avenues for "student loan borrowers who have been deceived or cheated by their schools to obtain loan forgiveness".

The Department of Education unveiled the massive proposed overhaul of the Borrower Defense rules in June 2016 and finalized the measures in October 2016, aiming to hold schools accountable in a court of law when they screw over students.

The regulations, put in place previous year, allow borrowers who have been deceived by their schools or are attending institutions that state attorneys general have taken enforcement action against to seek loan forgiveness.

Under the rules, students can have their loans erased if their college misrepresented the quality of its programs or broke a "contractual promise" with its students.

Secretary of Education Betsy DeVos on Tuesday responded to criticism that the Trump administration might allow federally funded charter schools to discriminate against LGBT students.

Due to pending litigation the Education Department said it's delaying the borrower defense to repayment rule, which was set to take effect on July 1.

"It is the department's aim, and this administration's commitment, to protect students from predatory practices while also providing clear, fair and balanced rules for colleges and universities to follow", DeVos said.

The department noted that while negotiated rulemaking occurs, applications for student debt relief will still be processed under the current borrower defense rules.

Education Secretary Betsy DeVos has championed private schools and supports vocational training in higher education.

Massachusetts Attorney General Maura Healey added that she plans to sue the Education Department "to defend these critical regulations and the rights of our students and taxpayers". He specifically targeted for-profit, career colleges that promise students they will find jobs post-graduation and can charge high tuition.

Last year, the ITT Technical Institute, one of the nation's largest chains of for-profit colleges, shut down, saying it couldn't survive sanctions by the department.

It stipulates that student debt repayment from these programs can not exceed 8 percent of annual earnings or 20 percent of discretionary income, or else they risk losing eligibility for federal student aid programs.

Rohit Chopra, a senior fellow at the Consumer Federation of America, lamented DeVos' decision to revise the rules.

"Relieving these hard-working Americans of their fraud-induced student debt will free them to participate more fully in their local economies, or even continue their educations with reputable schools", Becerra writes.

For-profits have slammed the rule as unfairly punitive because it establishes automatic triggers that would require a school to put up a letter of credit - a large sum of money - every time a lawsuit is filed against it to protect taxpayers if the institution fails.

"We commend the Department for moving forward to begin conversations that will really protect students from academic fraud", Steve Gunderson, CECU's president and CEO, said in a statement.

Latest News