Published by USA Today
By Kevin McCoy
People with student loans could soon find it harder to prove that the federal government should forgive their debts based on allegations of false promises or frauds by their schools.
The Trump administration on Wednesday issued a proposed new rule for dealing with so-called borrower defense claims filed by former students who say colleges misled them with unrealistic data about their job prospects after graduation or other frauds.
The changes would overhaul the system that’s handling tens of thousands of loan forgiveness applications from former students who say they collectively took on millions of dollars in debts. They say they took out loans based on misleading hiring data from Corinthian Colleges, a for-profit educational chain that ceased operations and closed its campuses in 2015.
The U.S. Department of Education says the proposed changes would aid students who were genuinely victimized by fraud, reduce frivolous claims, give colleges an opportunity to respond to borrower allegations, and help ensure that American taxpayers don’t end up bearing excessive costs from forgiven student loans.
However, the changes sparked immediate criticism from advocacy groups for student loan borrowers, presaging expected Capitol Hill opposition from Democrats.
Among the proposed changes:
- The Department of Education is weighing two standards, one that would require student loan borrowers to be in default before applying for debt forgiveness, and another that would allow them to apply while in good standing in their repayments.
- Student loan borrowers would need to show that their colleges had an “intent to deceive,” or a “reckless disregard for the truth” in their advertising or student recruitment efforts.
- Borrowers could also be required to show that the deceptions “resulted in financial harm to the borrower.” Former students also could need to show that the harm was related to their program of study.
- Colleges would not be barred from requiring students to submit their claims to arbitration, rather than pursuing relief in courts, including class-action lawsuits.
- Borrowers could have less time to seek relief because loan forgiveness application deadlines could be required within three years after the end of their college enrollment.
- Students who are able to transfer their credits to another college might not be eligible for loan relief.
- The Department of Education would have five years from the date of a final ruling on a student loan borrower’s claim to start proceedings to recover losses from the colleges.