Consumer advocacy groups are in an uproar over rumors about new Education Department rules that might leave some students with less loan forgiveness than they expected.
Under the Obama administration, all students who claim they were defrauded by now-shuttered for-profit colleges could apply to have their debt completely wiped out, a policy that already cost taxpayers more than $550 million. Education Secretary Betsy DeVos put the brakes on that plan and announced she will unveil new rules for student loan forgiveness in the coming months.
Officials who leaked news of the new policy claim DeVos wants to evaluate average earnings of students in similar programs and schools to determine how much debt to forgive. In other words, just because some of the for-profit schools published fake employment and earnings data to lure students and then went bankrupt doesn’t mean students didn’t get some valuable instruction that eventually helped them land jobs. Under the Obama administration, any student who filed a fraud claim could have their debt expunged, regardless of their employment and earnings status.
Critics say DeVos and Trump, whose own now-defunct for-profit college faced fraud claims, are bowing to industry pressure to go easy on the schools. Shortly after his election to the presidency, Trump settled a lawsuit brought by former Trump University students for $25 million.
But the Obama-era “borrower defense to repayment” policy didn’t enjoy universal support in academia. Critics noted it didn’t distinguish between schools that set out to mislead students and those who ran afoul of federal rules because of differing state reporting requirements. It even made administrators at non-profit colleges nervous.
Still, changing the rules now could create a legal nightmare because so many students have already had their debt forgiven. The government could face a rash of lawsuits from any of the 65,000 students whose loan forgiveness claims are still pending, if they don’t get the same treatment as their former classmates. —L.J.