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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.
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.