Trump Administration Plans Stricter Student Loan Debt Forgiveness Rules

The administration of President Donald Trump is closer to watering down Obama era rules that protected college students defrauded by universities from having to pay back their student loan debts, according to a Department of Education draft proposal acquired by Politico.

Education Secretary Betsy DeVos has indicated in the past that she would ease protections for defrauded borrowers, to the benefit of lenders, but the document shows how they propose to do so. The current program, Borrower Defense to Repayment, helps student who attended schools that misled them or violated other laws by wiping clean or curtailing their student loans.

The program was rolled out in 2016 in response to several for-profit colleges like Corinthian Colleges, DeVry and ITT Tech being found to have lied to students about things like job placement statistics and used other predatory tactics to entice students to enroll.

The document showed that the Department plans to limit the number of defrauded students eligible for loan forgiveness and raise the bar for what is considered fraud. Borrowers would need to have “clear and convincing” evidence of fraud as opposed to the lower threshold put in place by Obama — a “preponderance of the evidence.”

The proposal also showed that the department sought to limit claims to “within three years of the date the borrower discovered, or reasonably should have discovered, the misrepresentation.” Current rules allow borrowers six years to claim fraud.

The proposal would also eliminate a ban on mandated arbitration agreements — Obama rules forced the cases of colleges that receive federal aid to be settled in court. The draft also showed an intention to limit the role of state attorneys general by taking off the table fraud applications for groups.

The one place the rules would increase the possibility for claims is for students attending an institution that suddenly closes. The proposal seeks to allow students who withdrew from a college 150 days before it shuttered dispensation, up from 120 days. Obama rules automatically applied students to receive dispensation in some cases, DeVos’ rules would not.

The special committee convened by DeVos last June to look at these rules will meet again next week where the draft proposal will be discussed.