Education Secretary Betsy DeVos is proposing another delay of an Obama-era overhaul of rules to erase the federal student debt of borrowers defrauded by colleges.
Here’s how we got to this point:
- Changes approved by the Obama administration were slated to take effect in July.
- DeVos suspended them for a year and said she would convene a new rulemaking committee to rewrite the regulation entirely.
- To give that committee more time, the secretary now wants to further postpone the revisions.
- In a Federal Register notice published Tuesday, the U.S. Department of Education invited public comment on a plan that would give the agency until July 1, 2019, to implement updates to a regulation known as borrower defense to repayment.
The Trump administration argues that the additional delay is necessary to comply with a statute that says any regulatory change that has been finalized on or before Nov. 1 must take effect the following July, the start of the new financial aid award year.
Borrower defense to repayment dates back to the 1990s. It wipes away federal loans for students whose colleges used illegal or deceptive tactics to get them to borrow money to attend.
Borrower defense has become a last resort for many former students of the defunct for-profit schools ITT Tech and Corinthian Colleges.
Both schools spent their last few years clouded by allegations of fraud, deceptive marketing and steering students into predatory loans. Their students had hoped the evidence in the state and federal cases against the schools would create a clear path for loan discharge, but for the most part it has not.
The Obama administration’s revisions to the borrower defense rule were supposed to simplify and speed up the claims process.
It was also meant to shift more of the cost of discharging loans onto schools.
DeVos said the Obama administration created “a muddled process that’s unfair to students and schools, and puts taxpayers on the hook for significant costs.”
Education Department officials estimate that delaying the borrower defense revisions by a year will save taxpayers nearly $38 million, and pushing the rule back yet another year will save $46 million more.
The Trump administration says it will continue to process borrower defense claims under the existing regulation, but critics say that pledge is meaningless. Not a single claim has been approved since DeVos took office.
There are over 87,000 applications for debt relief pending at the department, according to people within the agency who were not authorized to speak publicly.
At least 10,000 of those claims have been recommended for approval, but people familiar with the matter say department officials are refusing to pull the trigger.
Consumer attorneys disagree with DeVos’s stance on borrower defense.
For instance, the new rule created by the Obama administration expands the conditions under which colleges have to get a letter of credit from a bank assuring the availability of at least 10 percent of the total amount of federal financial aid funds it receives, a stipulation meant to limit financial risk to taxpayers.
“This is another illegal delay by Secretary DeVos to allow predatory for-profit colleges to cheat students and taxpayers,” said Massachusetts Attorney General Maura Healey (D). Healey is leading 19 state attorneys general in suing DeVos over the delays to the new borrower defense rule.
Sen. Patty Murray (D-Wash.) says DeVos is “giving predatory corporations the green light to continue to take advantage of students.”
Murray is a ranking Democrat on the Senate Health, Education, Labor and Pensions Committee.