Students Defrauded By For-Profit Colleges Will Get Loan Relief

A federal judge ruled yesterday that the Education Department has dallied too long and must enforce a procedure that allows students who were defrauded by for-profit colleges to have their loans forgiven.

“The new rule, finalized in the last few months of President Barack Obama’s administration, is intended to strengthen a system called borrower defense that allows forgiveness of federal student loans for borrowers who were cheated by schools that lied about their job placement rates or otherwise broke state consumer protection laws. The new rule could expedite the claims of more than 100,000 borrowers,” reports Stacy Cowley for the New York Times.



“Education secretary Betsy DeVos had said the regulation … made discharging loans too easy and was unfair to taxpayers. The rule was due to take effect in July 2017, but DeVos froze it while she worked on devising a new regulation,” the AP’s Maria Danilova reports for Business Insider.

“But U.S. District Judge Randolph Moss ruled last month that DeVos’ delay was unlawful. On Tuesday, he denied a request by an organization representing for-profit colleges in California, to further postpone the rule, thus paving the way for borrower defense to enter into force,” Danilova continues.

“The secretary respects the role of the court and will defer to its judgment in whether parts of the 2016 rule will go into effect,” DeVos spokeswoman, Elizabeth Hill, said last week, Andrew Kreighbaum reports for Inside Higher Ed.

But Hill yesterday “said the department still wants to rewrite the regulations,” Laura Meckler writes for the Washington Post.

“Regardless of what the court decides, many provisions of the 2016 regulations are bad policy, and the department will continue the work of finalizing a new rule that protects both borrowers and taxpayers,” she said.

Moss’ decision is “a victory for Democratic state attorneys general, who with consumer advocates have been fighting in court to force the Education Department to enforce the ‘borrower defense’ rules.… The issue has been one of the most hard fought between Democrats and an Education secretary whom they have opposed on many fronts,” writes Michael Stratford for Politico.

“DeVos has been widely criticized by Democrats and consumer advocacy groups for siding with for-profit colleges over students,” writesCNN’s Katie Lobosco. “She’s hired department officials with ties to the for-profit college industry and plans to repeal another rule important to the Obama administration's crackdown on for-profit colleges like Corinthian and ITT Tech, which were accused of defrauding students and eventually shut down.”

Her boss, you may recall, has himself been accused of running “an elaborate bait-and-switch” called Trump University that was operating as an unlicensed educational institution from 2005 to 2011, when it also went out of business. 

Indeed, “investors seemed optimistic about the future of for-profit colleges after President Donald Trump won election in 2016, sending their stocks up. Trump himself had just agreed to settle three lawsuits filed against his real estate school, Trump University. Those lawsuits claimed the program also featured false advertisements and empty promises,” CNN’s Lobosco writes. 

But it was hardly alone. “There are more than 1,400 schools that closed between 2013 and 2015 whose students may now be automatically eligible for debt forgiveness, according to an estimate by The Century Foundation,” she adds.

The impact of skyrocketing student loan debt -- even for the most hallowed institutions --  is having a major impact on the overall economy and is only going to get worse, according to a story this morning by Bloomberg’s Riley Griffin, Suborna Panja and Kristina D’Alessio.

“Student loans have seen almost 157% in cumulative growth over the last 11 years. By comparison, auto loan debt has grown 52% while mortgage and credit card debt actually fell by about 1%, according to a Bloomberg Global Data analysis of federal loans. All told, there’s a whopping $1.4 trillion in federal student loans out there, marking the second largest household debt segment in the country, after mortgages. And the number keeps growing,” they write. 

“You have a whole generation of people that have a significant amount of student loans and its crimping demand for other goods and services,” Ira Jersey, the chief U.S. interest rate strategist for Bloomberg Intelligence, tells the reporters. “As people live with their parents or cohabit with a non-partner, millions of houses and apartments aren’t being purchased. Neither is WiFi or that extra sofa. We think this is having a significant impact on the economy.” 

DeVos, meanwhile, chatted yesterday with The Daily Signal’s editor-in-chief, Rob Bluey, about “why millennials like socialism.” Among other things, she also touts the extension of 529 Savings Plans that “of course also provides a huge opportunity for families to take advantage of, for now, K-12 education as well.” 

Who needs to borrow when all you have to do is save, right?

2 comments about "Students Defrauded By For-Profit Colleges Will Get Loan Relief".
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  1. Nina Lentini from MediaPost Communications, October 17, 2018 at 9:02 a.m.

    Grrrr, DeVos and the GOP policies around public education make me nuts. Nice column.

  2. Paula Lynn from Who Else Unlimited, October 17, 2018 at 11:12 a.m.

    Please read "Meet the Economist Behind the Stealth Takeover of America" 5/30/18 by Lynn Parramore for the Institute of New Economic Thinking. It is a history of George Mason University and the Kocks, et al, who decided that the country should be run by the aristocratics  with the rest of the people working to serve them. Betsy Devos' family is a part of the aristocratics who profess that policy - her education. Wonder which of her 7 yatches on which she chatted.

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