studentaid

Court Weighs Next Steps in Borrower Defense Lawsuit

After ruling that Education Secretary Betsy DeVos unlawfully delayed an Obama administration loan rule designed to protect defrauded student borrowers, a federal district court judge is still weighing what, if any, provisions of the rule should go into effect.

The case is unfolding as the Education Department completes a more restrictive overhaul of the borrower defense regulations that DeVos launched last year. If the department issues the new rule by Nov. 1, it would go into effect in July of next year.

Judge Randolph Moss is considering whether the much more generous Obama rule should take effect in the meantime.

Certain mandatory provisions of the rule, such as automatic "closed school" discharge for borrowers whose institution shut down, would benefit students. Others, such as a ban on arbitration agreements and new financial responsibility requirements, would affect colleges -- many of them in the for-profit sector.

In a hearing on the case Friday, attorneys for the Education Department asked the judge for another chance to more adequately justify its delay of the rule. The government and for-profit industry representatives argued sudden implementation of the rule would be disruptive and a logistical nightmare.

But Adam Pulver, an attorney with Public Citizen, argued that federal law requires that the 2016 rule now go into effect. And he said continued delay of the rule means continued harm for borrowers.

Moss in the Friday hearing expressed skepticism that the dropping forced arbitration provisions in particular would be an "earth shattering" change for colleges.

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Student loans

Congressional spending bill means increases for student aid, research

Congressional spending deal includes gains for student aid and NIH.

New data on gender gaps in benefits of nondegree credentials

A new analysis of federal data about holders of certificates, licenses and certifications shows that women pay more and get less for the increasingly popular credentials.

Judge: Delay of Borrower Defense Rule Unlawful

A federal judge ruled Wednesday that Education Secretary Betsy DeVos' decision to delay an Obama administration student loan rule was illegal.

After DeVos delayed the rule, known as borrower defense, consumer groups and student advocates sued the department. The regulations spelled out how borrowers defrauded or misled by their institution could seek loan forgiveness.

DeVos in July released a rewrite of the borrower defense rule that included tougher standards for borrowers seeking loan discharge. 

U.S. District Court Judge Randolph Moss did not direct the department to take any action on the regulation but said he would rule Friday on possible remedies 

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Bankruptcy Trustee Sues Feds, Lenders Over ITT Loans

The trustee appointed to oversee the bankruptcy proceedings for ITT Educational Services Inc. is suing the U.S. Department of Education and lenders who backed the failed for-profit chain's private loan program, The Wall Street Journal reported.

Deborah Caruso, the trustee, argued in a court filing last week that the department failed to adequately act to protect students from the loan program, which allegedly preyed on low-income students. Two years ago, ITT shut down its 130 campuses, which enrolled 43,000 students at the time. The company had been facing serious financial stress, sanctions from the department and a wide range of investigations and lawsuits.

"ITT’s PEAKS Loan Program was a for-profit education version of the sub-prime mortgage lending catastrophe, in which students rather than new homeowners were the victims," Caruso said in the filing. "For the benefit of ITT insiders and defendants, the PEAKS Loan Program allowed ITT to defraud students and evade regulators, while shielding the fruits of ITT’s fraud from claims of students through a complicated structure involving multiple trusts and a circuitous flow of funds between ITT and defendants. After ITT paid hundreds of millions to defendants, and millions to insiders, there was little or nothing to pay $1.5 billion in student claims, U.S. Department of Education claims, or claims of other creditors."

The trustee is seeking money to pay for some of the $1.5 billion in claims from students and others.

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For-profit chain will close dozens of campuses

Education Corporation of America says it will close nearly 30 campuses across the country by 2020 -- a response to lower student enrollment and another sign of restructuring in the for-profit sector.

Private University Cutting Prices for Families of Public Service Workers

Capital University in Columbus, Ohio, will offer half-price tuition for undergraduates whose families are in nonprofit and public-service work, it announced Wednesday.

The private university is calling the pricing program a “Good Guarantee,” casting it as a way to attract students whose families pursued “mission-centered careers.” It is also an attempt to get a second look from families to who might have thought a college education at a private university was too expensive to afford.

New full-time undergraduates enrolling in 2019 will be eligible for the program if they, their spouses or their parents or legal guardians are paid employees of nonprofit or public service organizations, The Columbus Dispatch reported. That would cover teachers, police officers, employees at churches and members of the military. About a fifth of households in Ohio that have students near college age have a parent or guardian in the targeted sectors.

In the 2018-19 academic year, Capital's annual full-time undergraduate tuition comes in at approximately $35,000. Current students will be able to apply for the new program if they meet certain requirements and receive financial aid packages equivalent to less than 50 percent of tuition.

Capital's effort comes as many small private colleges and universities are turning to pithy pricing programs in an attempt to grab attention from families that college leaders fear have been turned off by high sticker prices. Several institutions recently put in place so-called tuition resets, deeply cutting posted prices and often trimming unfunded financial aid to match. Because few if any students at such institutions pay full price, the hope is that a lower sticker price will attract new students without costing average net tuition revenue per student.

On Wednesday, another small private college sharply lowered its posted price when Stephens College, a women's college in Columbia, Mo., reduced tuition by $8,250 for the fall of 2019. Stephens branded that a college affordability plan and promised that no student would pay more than $22,500 after the change, down from a maximum of $30,750 today.

On Tuesday, the University of the Cumberlands in southeastern Kentucky announced plans to lower tuition by 57 percent to just under $10,000. Last month, Robert Morris University in Pennsylvania and Oglethorpe University in Atlanta unveiled programs with a different twist on price competition, linking tuition for some students to the amount various public flagship universities cost.

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Cumberlands Slashing Tuition by 57%

The University of the Cumberlands in southeastern Kentucky plans to cut tuition by 57 percent for all on-campus undergraduates next year, it announced Tuesday.

As a result, the tuition sticker price for the small Baptist university will fall from $23,000 this year to $9,875 in 2019-20, before counting room and board. The move drops the university’s posted tuition to be on par with public four-year institutions in the state, its leaders said.

While undergraduate tuition will be covered by the pricing change, graduate tuition will not, the Lexington Herald-Leader reported. That’s a key point, because the University of the Cumberlands’ enrollment skews heavily toward graduate students, with 1,366 undergraduates and 9,000 graduate students.

Nonetheless, the undergraduate tuition reset makes the University of the Cumberlands the latest and one of the most extreme examples of an institution following a tuition reset strategy. Tuition resets attempt to rein in private universities’ high-tuition, high-discount model, in which many enrolled students receive large amounts of financial aid and never actually pay the full posted tuition sticker price.

The idea is that resetting tuition can attract new students by grabbing the attention of families who were previously scared off by high sticker prices. In theory, it can be done without giving up much net tuition revenue per student, if tuition discounts are slashed in lockstep with sticker prices. But the strategy carries some risks, as private universities resetting tuition will lose revenue from any students who previously would have paid full price or near full price. The strategy could also cut into a university’s ability to attract top students with financial aid.

A significant number of institutions reset tuition this fall after announcing the moves last year. Many of them cut tuition by between 30 percent and 40 percent -- a much smaller reset than the University of the Cumberlands is planning. And even one that announced a 51 percent reset, Birmingham-Southern College, kept its tuition and fees much higher at $17,650, before room and board.

Including room and board, attending the University of the Cumberlands will cost $19,175 for undergraduates after the reset is in place. This year it costs $32,000. Current students are in line to save $1,298 on average, according to the university. Academic, athletic and extracurricular scholarships will still be available.

The university cast the move as part of its mission to serve students from the Appalachian region, from which it draws 82 percent of its students. Out-of-pocket costs will not increase for any students, the university’s president, Larry L. Cockrum, said in a statement.

“We want all students to know that with Cumberlands there is a clear and affordable path to a college degree,” he said.

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Financial sanctions at Howard University

After a financial aid scandal led to a federal review, prominent historically black college is placed on cash monitoring sanctions by Education Department.

DeVos Again Delays Decision on For-Profit Accreditor

Education Secretary Betsy DeVos this week delayed for the second time a final decision on the federal recognition of the Accrediting Council for Independent Colleges and Schools, an oversight body the Obama administration had sought to eliminate.

The department had until the end of July to review additional documents that a federal judge ruled the Obama administration had improperly failed to consider. DeVos had previously extended that review to Sept. 4. On Tuesday she issued an order extending that review to Sept. 28, citing the "voluminous nature of the records under review."

ACICS had overseen now-defunct for-profit chains ITT Tech and Corinthian Colleges.

An internal staff report released in June after an open-records battle found the organization failed the majority of federal standards for accreditors. But those findings won't be considered as part of the department's current review.

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