Student Loan News: DeVos Unveils Borrower Defense Changes

 September 6, 2019
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Welcome to Student Loan News, a weekly summary of developments and events affecting college debt in the U.S. Join us each Friday for a look at goings-on that could impact your own student loan situation.

Dept. of Ed rolls out new borrower defense regulations

The Department of Education last Friday unveiled its new regulations for those seeking to have their student loans wiped away because they were defrauded by their school, a rewrite of the rules known as borrower defense to repayment.

Under the revisions, students will now only have three years to file a claim — something that, according to Politico, would have invalidated “the vast majority of the hundreds of thousands of existing borrower defense claims“ if it had been in place earlier, as more than two-thirds of claims were filed later than that.

The new regulations also require more documentation to prove the school misrepresented information and that this affected the borrower’s choices. They also allow schools to insist on arbitration to resolve the disputes, which was not allowed under the original rules, crafted after the collapse of Corinthian Colleges in 2015.

However, the rewrite of the borrower defense rules does not require that borrowers default on their loans before they can get them discharged for fraud, as the administration had previously considered.

Education Secretary Betsy DeVos said the revised rules now include “carefully crafted reforms that hold colleges and universities accountable and treat students and taxpayers fairly,” Politico reported.

But the revisions also prompted criticism from the other side of the aisle, with Senate Minority Whip Dick Durbin (D-Ill.) calling it “another Trump-DeVos giveaway to their for-profit college cronies at the expense of defrauded student borrowers.”

How it affects YOU: If you plan to file a claim to have your student loans discharged because your school defrauded you, you might not be impacted, since the revisions aren’t slated to take effect until July 1, 2020. In fact, some former ITT Tech students look set to have their student loans discharged soon under the current rules.

That said, the new version of borrower defense might not even stick — Harvard Law School’s Project on Predatory Student Lending said it planned to mount a legal challenge to stop the revisions from being implemented. This group is the same one that successfully sued the Department of Education last year to start enforcing borrower defense.

If you believe you were defrauded by your college or trade school, be sure to file a claim with the Department of Education quickly, and meanwhile, watch for new developments on this front.

Also in the news…

  • Presidential candidate Sen. Michael Bennet (D-Colo.) announced some education proposals Thursday — including free preschool and community college — that he would pursue if he makes it to the White House, the Hill reported.
  • A group of public universities are urging the government to block the planned merger of textbook publishers Cengage and McGraw-Hill, saying it could “stifle innovation” and “also likely lead to higher costs,” Politico reported.
  • Maryland’s program offering free community college is off to a slow start, according to the Washington Post.

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