A long-delayed federal rule intended to protect student loan borrowers who were defrauded by their schools went into effect yesterday, after a judge rejected an industry challenge and the Education Department ended efforts to stall it any longer, the New York Times reported. 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, many of whom attended for-profit schools, including ITT and Corinthian, that went out of business in recent years. The new rule requires the Education Department to create a “clear, fair, and transparent” process for handling borrowers’ loan discharge requests, many of which have sat for years in the department’s backlog. It also orders the department to automatically forgive the loans of some students at schools that closed, without requiring borrowers to apply for that relief.
