A new rule finalized on Friday by the Obama administration will cost student debtors who say that their colleges defrauded them some longstanding rights to get their federal loans canceled, while colleges on shaky financial footing dodged a government crackdown, Bloomberg News reported. Those regulations, proposed in June, mark the administration's response to the spate of closures of for-profit colleges, following state and federal investigations and lawsuits that have so far led more than 80,000 Americans to seek debt relief, alleging fraud, according to new figures the U.S. Department of Education also released on Friday. According to a summary of the rule the agency provided on Thursday, borrowers who receive federal student loans starting next July and who subsequently accuse their colleges of misleading them into enrolling will face a narrower path to debt relief than today's borrowers. If the rule is upheld, defrauded student debtors no longer will be able to get their loans canceled by alleging that their schools violated state laws, unless they first successfully sue. Instead, they'll be subject to a new federal standard — one that officials say is more efficient but consumer advocates say limits borrowers' ability to file claims.
