Elected Officials Weigh In on Borrower Defense

August 3, 2016

U.S. senators and state attorneys general were among the more than 10,000 individuals and groups to submit comments on the U.S. Department of Education's 530-page proposed rule for federal loan forgiveness for students whom colleges defrauded or misled. Most lined up along partisan lines, with Democrats supporting the rule or calling for it to be strengthened, while Republicans said the rule was overly broad and unfair.

A group of 19 Senate Democrats and Senator Bernie Sanders, the independent from Vermont, called on the department to "close unintended loopholes, increase accountability to students and reduce the complexity of the regulation." Senator Patty Murray, the ranking member of the Health, Education, Labor and Pensions Committee (HELP), signed the letter.

On the Republican side, Lamar Alexander of Tennessee, who chairs the HELP Committee, submitted a comment warning of "unintended consequences" of the proposed rule, saying it is vague and ambiguous, unfairly targets for-profits, and will be expensive to taxpayers.

Likewise, attorneys general representing Arizona, Colorado, Michigan, Oklahoma and Texas wrote to raise concerns about the financial responsibility portion of the regulations, which includes the filing of certain types of lawsuits against colleges as "triggers" requiring actions that could get expensive. The automatic triggers would "violate due process and fundamental fairness" while failing to further the goal of ensuring institutions' financial and administrative responsibility, they said.

A group of attorneys general from 17 states and the District of Columbia wrote in "strong support" of much of the rule. The group, which was led by Maura Healey, a Massachusetts Democrat, also called on the department to strengthen language around group discharges and arbitration agreements.

In addition, Tom Miller, a Democrat and Iowa's attorney general, submitted a comment that, while applauding the rule over all, raised a concern about a "potential chilling effect these rules could have on settlements with educational institutions." The problem, Miller said, is that AG investigations are an automatic triggering event under the rule, so colleges being investigated will have a "strong incentive" to resist settling to avoid the expensive outcome of a financial trigger.

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