Rules to help defrauded students clear loans being revised

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The Education Department announced Wednesday that it will change two key Obama-era rules governing student loan forgiveness. Photo via Flickr user Victor Björkund

WASHINGTON — The Education Department announced Wednesday that it will change two key Obama-era rules governing student loan forgiveness in cases involving fraud and misconduct by universities.

The department said it will convene special committees to rewrite Borrower Defense to Repayment and Gainful Employment regulations.

The rules were introduced last year as the department was processing claims from thousands of students who say there were defrauded by for-profit colleges.

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.

But DeVos said in a statement Wednesday those regulations were “overly burdensome and confusing” and need to be streamlined. She said many colleges have complained that the definition or misrepresentation and breach of contract is too broad and that institutions lacked meaningful due process.

“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.

She added that nearly 16,000 defense claims that are currently being processed by the department will be fulfilled. “Promises made to students under the current rule will be promises kept,” she stressed.

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Eight states and the District of Columbia filed a motion in federal court Tuesday seeking to retain the rules.

“The borrower defense regulations provide critical protections for borrowers who were subjected to misleading and predatory practices by their postsecondary institutions,” the motion says. It was filed in the case California Association of Private Postsecondary Schools v. Betsy DeVos.

The Obama administration had led a crackdown on for-profit colleges accused of misconduct. The Corinthian Colleges chain was under heavy pressure from the Education Department when it shut down in 2015. In that case, more than 15,000 student claims for loan discharge because of fraud have been approved, totaling $247 million in loans.

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. The chain had been accused of misleading students about the success of its graduates and was at risk of losing its academic accreditation.

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