Students who say they were defrauded by colleges and want their education loans erased will have a tougher time seeking forgiveness under newly issued regulations from the Trump administration, the Washington Post reported. A 1995 law known as “borrower defense to repayment” gives the Education Department authority to cancel the federal debt of students whose colleges misled them about graduation or job placement rates to get them to enroll. The Obama administration updated the regulation to shift more of the cost of forgiveness onto schools, after the closure of for-profit giant Corinthian Colleges ushered in a flood of claims. The Trump administration on Friday finalized its rewrite of the Obama-era rules, after two years of trying to delay and then scuttle the regulations. Those efforts have spawned lawsuits, with the courts forcing the Trump administration to implement the 2016 rules and process a backlog of applications for debt relief. Still, more than 180,000 borrowers await answers. The Trump administration estimates the rules will save the federal government $11 billion over 10 years — loan payments that would have gone uncollected under existing rules. The regulations also hand a victory to for-profit colleges that derided the Obama rules as harmful to their programs. Most borrowers who seek relief from debt attended for-profit campuses. Read more.
In related news, the House Financial Services Committee will hold a hearing next Tuesday titled "A $1.5 Trillion Crisis: Protecting Student Borrowers and Holding Student Loan Servicers Accountable." For more information, please click here.
The issue of student loan debt and bankruptcy is the first problem addressed in the Final Report of the ABI Commission on Consumer Bankruptcy. Click here to download your copy.
