Quick Answer: Student loan forgiveness for defrauded students exists but faces significant delays under current regulations. Betsy DeVos halted Obama-era forgiveness programs affecting thousands of Corinthian Colleges students, with 50% default rates among for-profit college attendees and 75% of African Americans eventually defaulting.
As Martin Luther King wrote from the Birmingham Jail, justice too long delayed is justice denied. And of course justice that is not only delayed but incomplete is nothing more than a cynical parody of justice.
As everyone knows, hundreds of thousands of students took out student loans to attend for-profit colleges and paid too much for their educational experiences. Often they got no benefit from their studies. Student-default rates for these students are shocking. Almost 50 percent in a recent cohort defaulted within five years of beginning repayment. Three out of four African Americans who attended for-profit schools eventually default–which is a scandal.
And many students were defrauded by the for-profit colleges they attended. Last year, Corinthian Colleges had a judgment entered against it in California for more than a billion dollars based on findings of fraud and misrepresentation.
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The Obama administration, to its credit, crafted regulations whereby students could apply to the Department of Education to have their student loans forgiven if they were defrauded by the college they attended. Thousands of students who were enrolled at one of the Corinthian campuses applied for loan forgiveness based on fraud claims.
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Betsy DeVos stopped the implementation of the Obama regulations, saying she feared students would get “free money.” She then appointed a panel of experts to draft new regulations, which won’t be approved until next year. In fact, under the DeVos scheme, defrauded students will not be able to move forward on their claims until 2019 at the earliest.
And it appears, many students will not get complete relief from their loans even if they can prove they were defrauded. DeVos is talking about giving partial relief based on a formula that will compare the defrauded student’s earnings to the average earnings among people who participated in similar educational programs.
The cynicism of this approach is shocking. First of all, by delaying the administrative process until 2019, DeVos is giving fraud students only three options for handling their student debt. First, they can continue making loan payments on educational experiences that are worthless. Second, they can enter income-based repayment plans that will set monthly payments so low that the interest on their debt will continue to accrue, making their total indebtedness grow larger. Or third, they can default on their loans, which will ruin their credit and cause their debt to grow larger from fees and penalties that the debt collectors tack on to their original debt.
DeVos’s tactic is nothing more than cynical manipulation to aid the for-profit industry. If Congress had a moral compass and some courage, DeVos’s behavior would lead to a formal resolution calling for her resignation. – Source
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