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Few Details on Tougher Borrower-Relief Standards

January 9, 2018
 
 

Department of Education officials said Monday that they do not have any estimates of how many borrowers would clear new, tougher standards proposed for claims of loan relief when a student is defrauded or misled by their college. The department’s proposed language would require a student borrower to demonstrate clear and convincing evidence that their college intended to deceive them or had a reckless disregard for the truth in making claims about job-placement rates, credit transferability and other outcomes.

The language was offered ahead of the second round of negotiated rule making to produce a new rule governing how students can seek forgiveness of federal student loans if they are misled by their institution, known as a borrower defense. Negotiators representing student advocates pressed the department repeatedly Monday for details on how students would make demonstrations of evidence under the new tougher standard and for estimates of how many current applicants would clear the new standard.

Department officials said they could provide neither -- partly because borrowers have never been asked to provide evidence of intent under existing standards.

The student advocates on the panel argued that requiring borrowers to demonstrate intent or knowledge of misrepresentation on the part of a college would effectively mean no student gets relief on their loans under the rule.

“I really think this would effectively do away with borrowers’ ability to get relief in almost all circumstances,” said Abby Shafroth, a lawyer with the National Consumer Law Center and a negotiator representing student legal assistance organizations.

The new federal standard would apply to borrower-defense claims made on federal loans issued after July 2019. The department’s proposal would also allow for successful claims when a borrower wins a judgment against their college from a court or arbitrator. The existing loan-forgiveness rule bases misconduct findings on violations of state law related to federal student aid. The Obama administration in 2016 issued a borrower-defense rule that for the first time established a federal standard for those claims. But Education Secretary Betsy DeVos blocked the rule last year just before it was to go into effect, setting up the current round of rule making.

Negotiators were unable to reach a compromise Monday on tweaks to the standard for relief but will continue discussing the proposed standard during the four-day rule-making session this week.

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