Secretary of Education Betsy DeVos seems to be waging a terrible war against student loan debtors who have been defrauded by their schools in order to extract federal student loan money. Since the Trump administration took over the Department of Education has not actually delivered relief to a single Borrower Defense to Repayment claim. Yet they brag as of December 20, 2017 they have just approved “12,900 pending claims submitted by former Corinthian Colleges, Inc. students, and 8,600 pending claims have been denied.”
Under that Department of Education program the student previously would be forgiven from the student loans obtained by deception and the government would claw back the money the school got.
Most of these claims have been submitted by students of for-profit schools who played fast and loose with their marketing.
But it seems the government is turning its back on students who have been misled by schools to get their student loan money. Not only is the Department of Education changing the rules but they are also proposing rules that students who land better jobs after graduation should not be forgiven from the loans they were defrauded by. Either you are or are not a victim of fraud but the proposed policy create a middle ground where victims get to be only partial victims.
Under the headline of “Improved Borrower Defense Discharge Process Will Aid Defrauded Borrowers, Protect Taxpayers” the government proposes what they say is more fair. Department of Education Secretary DeVos says “No fraud is acceptable, and students deserve relief if the school they attended acted dishonestly.” But then goes on to say relief is conditional based on gainful employment. – Source
While the Department of Education brags about their recent wave of Corinthian College Borrower Defense to Repayment claims they also disclose “rather than taking an “all or nothing” approach to discharge, the improved process will provide tiers of relief to compensate former Corinthian students based on damages incurred.”
Relief from fraud will be dependent on the current earnings of the victims. Victims earning 70% and above of the income of their peers will only receive a 30 percent forgiveness of the fraudulent student loans. So to be clear, that income test is against the other students who were the victims of the same fraud and not the general population.
As a bonus the Department of Education gives fraud victims this carot “to mitigate the inconvenience for how long it has taken to adjudicate claims, the Department will apply a credit to interest that accrues on loans starting one year after the borrower defense application is filed.”
So the Department of Education will take forever to deal with the forgiveness application and then only tack on a year worth of interest while they drag their feet.
Please Sir, May I Have Some More?
Now to add insult to injury the Department of Education is proposing making it much harder for students to prove they were subject to misrepresentation to induce enrollment in an effort to extract money from students loan debtors.
The proposed forgiveness plan is to eliminate any successful judgment against a school by an Attorney General as proof of deception. Instead the individual student would have to obtain an individual judgment against the school. This would require a legal action that nearly all students would never be able to afford to file. Additionally the defrauded student would have to show clear and convincing evidence they were intentionally misled and that misrepresentation let to monetary harm.
“They’ve made it almost impossible for borrowers to meet the misrepresentation standard by requiring them to demonstrate the intent of the school especially when students don’t have the power of discovery” to examine the inner workings of a school, said Clare McCann, deputy director of higher education policy at New America, who worked on the Obama-era policy. “They took every dial and dialed to the far extreme. It really tries to make [the regulation] as useless as possible.”
Pretty soon we are going to need a Department of Education Victim Helpline to assist people soon to be screwed over by a government department that clearly appears to be putting for-profit colleges first.