Proposal Would Raise the Bar for Borrowers Seeking Loan Relief

"The Department of Education will propose next week that borrowers be required to demonstrate their institution intended to mislead them before they can have their loans discharged," Inside Higher Ed reports.

"Student advocates say that would effectively mean no borrowers are able to get relief on their student loan debt through a provision of federal statute known as borrower defense to repayment.

Education Secretary Betsy DeVos and the Department of Education are in the midst of an overhaul of borrower-defense regulations through a negotiated rule-making process launched after DeVos blocked a 2016 Obama administration rule from taking effect. Department officials will make the proposal at the second round of meetings between negotiators from a wide range of interest groups.

The proposed language would require that a borrower demonstrate clear and convincing evidence that their college acted with an intent to deceive or misrepresent in claims about job placement rates, licensure passage rates, transferability of credits, enrollment requirements or other facts involving the institution and its graduates. The department proposal would also allow successful claims when a borrower shows their college acted with a “reckless disregard for the truth” or when the borrower has won a judgment against the college in a court or through an arbitrator. The new standards would apply to borrower-defense claims filed on loans issued beginning in July 2019. While the language leaves open other circumstances for a successful claim, most borrowers won’t have the resources, for example, to file a lawsuit against their college, advocates said.

After a surge of borrower-defense claims following the collapse of Corinthian Colleges, the Obama administration crafted a new rule that provided a federal standard for loan relief and clarified how borrowers could pursue their claims. The language being contemplated by the department would maintain a federal standard but make it exceedingly difficult for students to clear that bar."

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Publication Date: 1/3/2018

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