Students may face new debt forgiveness rules
Education Secretary Betsy DeVos moved Wednesday to make it harder for students who say they were defrauded by colleges and universities to erase their debts, rolling back Obama-era regulations that for-profit colleges saw as onerous.
The rules published Wednesday require students to prove schools knowingly deceived them if they want their federal loans canceled. And it scuttled an Obama provision that allowed similar claims to be processed as a group. Instead, students will have to prove their claims individually.
The new rules also kill an Obama provision that barred colleges from requiring students to sign agreements that force them into arbitration in the event of a dispute.
The rules are DeVos’ rewrite of an Obama-era regulation published in 2016 and part of that administration’s crackdown on for-profit colleges that critics say prey on vulnerable students. In ways big and small, the new version makes it harder for students to win debt forgiveness.
“Postsecondary students are adults who can be reasonably expected to make informed decisions and who must take personal accountability for the decisions they make,” said the proposed regulation, which was posted online Wednesday.
Still, DeVos said in a statement, “Our commitment and our focus has been and remains on protecting students from fraud.”
The agency punted for now on one key question: whether students must be in default in order to apply for loan forgiveness. Allowing “affirmative claims” from students who are current on their loan payments could invite a flood of applications, the agency warned, because there is little downside to asking for loan forgiveness. At the same time, the Education Department said, it does not want to create incentives for borrowers to fall into default in hopes of winning debt relief.
The agency is also seeking comments on what the standard should be for students to prove their case. The Obama rule imposed a “preponderance of evidence” standard, but the agency is also considering the higher burden of “clear and convincing” evidence, particularly in the case of claims from people not in default, if those are ultimately permitted.
The department aims to publish a final rule by Nov. 1 so that it can take effect for loans originating after July 1, 2019. The agency will allow 30 days for public comments on the proposal.
Students with existing student loans can also ask for loan forgiveness under standards established in 1995.