New proposal from Betsy DeVos could strip students of key “borrower defense”

Betsy DeVos proposes for-profit school protections that could gut “borrower defense”

Fraud could overrule forgiveness

“The Trump administration is considering making it harder for former college students who accuse schools of fraudulent behavior to have their student loans forgiven.


The draft plan, which the Education Department has circulated among members of an assessment panel, would replace an Obama administration policy designed to reimburse students who say their colleges lied to them while recruiting…. 


For-profit colleges, which would be most affected by the rule, cheered the proposed changes.”


The Wall Street Journal, “Trump Administration Seeks Curbs on Student-Loan Forgiveness,” 1/3/18

Just before the new year, you may recall that I was up in arms about the news that the Department of Education—led by Secretary Betsy DeVos—had been sitting on a backlog of student debt-relief claims, some up to six months old. Currently, there are more than 100,000 pending claims, while only a handful have been resolved.

Sadly, that was just the start of the administration’s stonewalling on this issue. According to a report in The Wall Street Journal, DeVos and the DOE have now drafted a proposal to upend an Obama-era regulation known as the “borrower defense.” Currently, this rule makes it possible for students defrauded by for-profit colleges to apply to have their federal student loans forgiven—for instance, in cases where schools intentionally mislead prospective students about the average salaries of previous graduates.

It’s probably not a coincidence that a provision of the new proposal would also prohibit state attorneys general from filing claims against these schools, meaning an AG would no longer have the ability to sue a predatory for-profit college on behalf of a group of students. You might remember that New York’s attorney general, Eric Schneiderman, successfully obtaining a $25 million settlement in the class-action fraud suit against DeVos’s boss and his now-defunct for-profit Trump University.

As I’ve noted before, for-profit colleges are responsible for a good chunk of the student debt that has grown exponentially over the past generation. A full 96% of students at these schools end up taking out loans to pay tuition. And that’s where the “profit” in for-profit really comes in: Federal aid lines the coffers of some seriously shady corporations, while students often earn degrees that have little real-world value—or impact on their earning potential.

According to the Wall Street Journal report, “The new student-loan plan—which isn’t final and could be changed—would affect those who take out loans beginning in July 2019.”

If you look at the big picture, this is just another instance in which the Trump administration has shown it’s more interested in giving power to entities with profit-making motives than to consumers—in this case, students. See also: the gutting of the Consumer Financial Protection Bureau, the attempt to ditch the Fiduciary Rule, the hardline on DACA recipients, and a tax code upheaval that stands to benefit corporate interests far more than it does ordinary Americans.

What can you do? If you’re concerned about both college access and college accountability, let your voice be heard by contacting your representatives in congress.

Update 9/19/18: Calling the delay “unlawful,” “procedurally invalid,” and “arbitrary and capricious,” a federal judge ruled against a plan by Secretary DeVos to curtail the Obama-era loan forgiveness rule for students defrauded by for-profit colleges, known as borrower defense. Attorneys general from 18 states and the District of Columbia filed the lawsuit.

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