UPDATED: Jan. 17, 2018 at 11:52 a.m.

A policy recently proposed by the Department of Education could make it more difficult for student loan borrowers to seek loan forgiveness if they say a college intended to hurt them financially, experts said.

The policy, currently under consideration by members of the DOE’s negotiated rulemaking committee, would significantly affect rules governing loan discharges.

Such rules allow students to have their federal loans discharged, or cancelled, if their university or college, “engaged in certain fraudulent conduct or misrepresentation that resulted in harm to the borrower in some way,” said Adam Minsky, a student loan lawyer.

Borrower defense rules were not used extensively until education company Corinthian Colleges started to “collapse” in 2014, said Clare McCann, deputy director for federal policy at New America, a think tank. But the rules were originally implemented in the 1990s.

McCann previously served as a senior policy adviser at the DOE, during former President Barack Obama’s time in office.

Corinthian Colleges, which owned multiple for-profit colleges, closed all of its schools after officials there were accused of lying about job placement records and graduation rates, leaving students without degrees or certificates, according to The Washington Post.

In order to handle their federal loans, students affected by Corinthian Colleges started to turn to borrower defense rules as a way to seek loan forgiveness, McCann said.

“The Department of Education received tens of thousands of applications for borrower defense relief from students who said they’d been lied to,” she said. “So (the DOE) needed to develop a new, robust process that could handle that volume of claims.”

In 2015, the Obama administration started to define what constitutes a lie by a college in an effort to recreate the borrower defense rules. Officials also outlined the steps needed to have a claim reviewed and approved under the rules, McCann said.

The rules were finalized the summer before Obama’s term was set to end, Minsky said.

“It’s pretty unusual to have a rule published so late in an outgoing administration,” McCann said.

The new rules, which were not officially put into place before President Donald Trump took office, were halted by the DOE, as overseen by Secretary of Education Betsy DeVos, Minsky said.

Now, the DeVos-led DOE is proposing its own set of borrower defense rules. The new rules would require students to prove their college intentionally lied to or mislead them.

“Students will not have access to information to even begin to prove that their school intended to mistreat them,” said Charlotte Hancock, communications director for the progressive think tank Generation Progress, in an email. “If it becomes regulation, the proposal will mean that the chance of mistreated students actually getting the relief they are entitled to, under the law, is virtually nonexistent.”

The DOE’s negotiated rulemaking committee is in its second negotiation session, with its third and final session scheduled for mid-March, Hancock said.

“This round of negotiations seems to be particularly contentious,” she added.

McCann said she thinks it’s unlikely the proposal will be passed after the three negotiation sessions, and will instead have to be published as a proposed rule, which would require it to go through another public comment period to become official.

“People are just too far apart on what they think is an appropriate system for processing borrower defense claims,” she added.

Borrower defense rules apply to for-profit and nonprofit colleges. However, more fraud and predatory practice happens in the for-profit sector, Minsky said.

If passed, the proposal “will affect the most direct and official process for defrauded students,” Hancock said.

McCann said she expects the DOE to submit an official policy proposal regarding the rules by Nov. 1 of this year.

CORRECTION: In a previous version of this post, Charlotte Hancock’s title was misstated. Hancock is the communications director of Generation Progress. The Daily Orange regrets this error.

Published on January 16, 2018 at 8:20 pm

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