Higher Education

Would proposed borrower-defense rules help or harm indebted students?

New federal regulations have been proposed for student borrowers who want debt relief

Student borrowers

The Capitol is seen in Washington, D.C., Wednesday, Aug. 1, 2018

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The Department of Education revealed last week a new plan for relieving some students of their federal debt, but the proposed regulations could actually leave students with a huge bill.

These proposed rules are a rewrite of the 2016 borrower-defense rules enacted under Barack Obama. They allow borrowers to have their federal loans forgiven if their schools have closed or engaged in misconduct, such as providing lackluster academics or little-to-no career preparation. Thousands of students from Corinthian Colleges, a now closed for-profit school, used the 2016 rules to get debt relief.

Many higher education experts say the proposed rules, unlike those used under Obama’s administration, put the burden of guilt on borrowers for not making a wise decision about their education instead of on schools that use students primarily to make money.

The new regulations call for several changes to the process for getting federal loans discharged.

Here are a few: There will be one, federal process for determining debt forgiveness instead of a state-by-state process. Students who leave an institution before it closed down would be eligible for 180 days, instead of the current rule’s 120 days, to have their loans discharged. Those who claim their institutions wronged them would no longer automatically have their loans discharged if their school closed and they did not re-enroll within three years of the closure. A borrower who is unsuccessful at getting federal loans discharged because of an institution’s misconduct will no longer be able to appeal.

The Institute for College Access and Success outlines other differences between the proposed regulations and the 2016 rules.

The department says that these rules will hold institutions accountable as well as push students to make wise decisions about their education.

Related: OPINION: We must increase our efforts to protect students from predatory colleges

An overview of the proposed regulations from the department states: “The Department’s goal is to enable students to make informed decisions prior to college enrollment, rather than to rely on financial remedies after the fact when lost time cannot be recouped and new educational opportunities may be sparse. Postsecondary students are adults who can be reasonably expected to make informed decisions if they have access to relevant and reliable data about program outcomes.” One goal of the regulations, it says, is to “better protect the interests of taxpayers.”

But protecting taxpayers could be costly for students, many of whom also pay taxes.

“The Department estimates that the new rule will reduce the amount of loan forgiveness for borrowers by $13 billion,” according to the Institute for College Access and Success.

Student debt in the United States is more than $1.5 trillion.

Bobby Scott (D-Va.),  the Democrats’ ranking member of the House Committee on Education and the Workforce, in a statement said: “The Trump administration’s repeated efforts to weaken consumer protections for students – including its most recent action to dramatically limit support for students defrauded by a for-profit institution by rewriting the Borrower Defense rule – is a call to action for Congress to reaffirm and strengthen its commitment to protecting students and taxpayers from waste, fraud, and abuse.”

Student debt relief advocacy organizations The Debt Collective and Higher Ed, Not Debt, as well as the higher education policy expert Jen Mishory at The Century Foundation, also oppose the suggested regulations.

Lamar Alexander (R-Tenn.), chairman of the Senate’s Health, Education, Labor and Pensions committee, believes Betsy DeVos, the secretary of education, is on the right path.

“Secretary DeVos is right to propose new regulations that set important safeguards and clear standards for when a student can file a claim, so taxpayers aren’t paying for unreasonable or unsubstantiated claims of fraud,” he said in a statement.

The public has until Aug. 30 to weigh in with comments on the proposed regulations with the Federal Registrar before the department moves forward.

This story about the high education loans was produced by The Hechinger Report, a nonprofit, independent news organization focused on inequality and innovation in education. Sign up for the Hechinger newsletter.

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Letters

Delece Smith-Barrow

Delece Smith-Barrow is a senior editor for higher education at The Hechinger Report. She was a 2017 Knight-Wallace Fellow at the University of Michigan, where… See Archive

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On the topic of Higher Education --watchdogs are needed. When a Student looks for a school for a Higher Ed degree i.e., PhD, she expects that school will deliver that degree as a quality product and with qualified and trained Faculty. How does a student know what the school provides? what is the name of that report where this information would be reliable? --she can only rely on the few facts: 1. The school is accredited and (2) has had that degree level in progress for years. To additionally now have to evaluate her school choice --for its fraudulent actions on the Student Federal Aid funding is ridiculous. That is not public information. There are agencies supposedly doing this work and they were too big & over time with their complacency-- they were not doing it. It is up to the University to be honorably to be held accountable. At this time rather than this restrictive Borrowers Defense a more simple answer will provide better result-- Student should use State School only----then the Student would be guaranteed safety. If the Federal Government or DOE does not want to protect the Students-- that is the only choice. The Students are not responsible---the Universities are and sanctions and checkpoints should be in place on those Universities within 3 years--- to protect the Students. I suggest for for-profit Universities---a better system of checks be put in place. Also those Students file a complaint not at the schools---but with the federal accrediting agencies when 100 complaints come in on one program---there is obviously a problem with the School---at that point a checklist goes out to all those students in that school in that program and for the past 2 years when 40% report a similar experience ---that program is closed to admissions for that degree---yes that degree-- and the school pays for a full investigation of that program not the taxpayers. That is a beginning to end the plethora of Federal Student Aid fraud that has occurred over the past 15 years with our For -profit Universities.

- from Deborah Parker, Aug 16, 2018