Student Loan News: Senate Blocks DeVos’ Borrower Defense Rules

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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.

Senate votes against Education secretary’s plan

A bipartisan majority in the U.S. Senate voted on Wednesday to halt Education Secretary Betsy DeVos’ limits on borrower defense to repayment, a federal student loan forgiveness program that provides relief to defrauded students.

Ten Republicans joined Senate Democrats to vote down DeVos’ rule changes by a 53-42 margin. One of those Republicans, Sen. Rob Portman of Ohio, was quoted by Cleveland.com as saying Tuesday: “If the school is fraudulent and gets them there under false pretenses, [the borrowers] should have some relief on their student debt.”

DeVos’ plan, which was unveiled in August 2019, would limit affected borrowers to three years to file their claim — a restriction that, according to a Politico report, would keep two-thirds of applicants from approval. The secretary’s proposal also requires borrowers to meet a higher burden of proof for their claims, and it allows schools to insist on settling disputes via arbitration.

If President Trump signs the Senate-passed legislation, borrower defense to repayment would revert to its original rules, which allow borrowers six years to apply for forgiveness and permits students to avoid arbitration. Trump has said he is “neutral” on the resolution, according to Politico.

How it affects YOU: If your school mistreated you, read up on borrower defense to repayment to see if you could qualify for relief. Meanwhile, we’ll keep tabs how the program’s criteria change, if at all.

Also in the news…

  • While appearing before the Senate last week, DeVos said the White House was seeking to sunset Public Service Loan Forgiveness. “The administration feels that incentivizing one type of work and one type of job over another is not called for,” DeVos said, according to Yahoo Finance. “And we have a demand in our over 7 million jobs going unfilled today, and favoring one type of pursuit over another type of pursuit philosophically doesn’t line up with where we are.”
  • The spread of the coronavirus COVID-19 has affected the economy, causing the Federal Reserve to cut interest rates. It has also led to the closing of some colleges and universities. Student Loan Hero is tracking some of these major school closures here.
  • A bill that would eliminate federal student loan debt for permanently disabled veterans passed the House this week and now awaits its future in the Senate. The bill would enshrine in law the White House’s executive order, which also wiped away disabled veterans’ student debt.
  • The University of New Mexico proposed a 2.6% tuition increase for in-state students and 5% hike for out-of-state students late last week, according to the San Antonio Express-News. The proposal also calls for non-state tuition to rise an additional 5% over the following two years. The planned upticks come at an interesting time, as the flagship university would be covered under the state’s proposal to waive tuition for all residents.

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