Feds' New Methodology for Borrower Defense

December 11, 2019

Betsy DeVos, the U.S. secretary of education, on Tuesday announced a new methodology for the Education Department to cancel loan debt balances held by defrauded students. The announcement comes amid sustained criticism by Democrats in the U.S. Congress and legal challenges by consumer advocates about the department's plan to offer partial loan relief in many cases. Roughly 227,000 borrowers, most of whom attended for-profit colleges, have filed claims.

The department said the methodology relies on publicly available earnings data and a "scientifically robust" statistical approach.

"We cannot tolerate fraud in higher education, nor can we tolerate furiously giving away taxpayer money to those who have submitted a false claim or aren’t eligible for relief," DeVos said in a statement. "This new methodology treats students fairly and ensures that taxpayers who did not go to college or who faithfully paid off their student loans do not shoulder student loan costs for those who didn’t suffer harm."

The department will rely on publicly available data to compare median earnings of graduates who have made borrower-defense claims to the median earnings of graduates from comparable programs. If earnings from graduates of a college are lower than the median for that program at comparable institutions, then the borrowers will be determined to have suffered harm and will receive at least partial student loan relief.

Hundreds of claims that have been adjudicated under the new methodology, mostly those filed by students who attended the former Corinthian Colleges or ITT Technical Institute, will be released this week, the department said.

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