By SteveRhode, January 3, 2018
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 deadline 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.
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.
*****
Steve's essay was originally posted on The Get Out of Debt Guy web site.
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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