U.S. Considers Partial Relief for Defrauded Student Borrowers

"Student borrowers have filed tens of thousands of additional applications for discharge of student debt since the Trump administration last updated Congress over the summer," Inside Higher Ed reports. "But the Department of Education has yet to issue any new resolutions of those claims, known as borrower-defense applications. And while borrowers wait for a ruling on their claims, there is an ongoing debate within the department over whether it could grant partial relief to some applicants -- and on what basis it would determine the proper amount of relief for those borrowers."

"Borrowers are allowed to seek discharge of their federal student loans if they were misled by their college or university, or if the institution violated certain state laws. The option was little used before the collapse of the for-profit Corinthian Colleges chain in 2015 and ITT Tech in 2016.

A flood of applications followed from former students of those and other for-profit institutions. Tens of thousands of those claims were still pending review by the department when the transition in administrations took place in January. And to the consternation of student advocates, the backlog of claims has only grown.

The Washington Post first reported that partial relief was on the table this week; a person with knowledge of those discussions confirmed to Inside Higher Ed that they had taken place.

Liz Hill, a spokeswoman for the department, said she could not address whether partial relief for defrauded borrowers was on the table.

'We're working on a process for adjudicating all pending claims,' she said. 'There's still a lot of internal discussion going on about the best way forward.'

... Some student advocates see internal discussions over granting relief as a sign that borrowers who have waited as long as two years for a resolution on their claims could remain in limbo for the foreseeable future.

'The more precise you want to be about the damages done to borrowers, the less efficiently you'll be able to move these claims through,' said Justin Draeger, president and CEO of the National Association of Student Financial Aid Administrators. 'I'd lean toward moving these claims forward.'"

NASFAA's "Headlines" section highlights media coverage of financial aid to help members stay up to date with the latest news. Inclusion in Today's News does not imply endorsement of the material or guarantee the accuracy of information presented.

 

Publication Date: 10/26/2017

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