Congress agreed in March to scrap Education Secretary Betsy DeVos’s overhaul of a 1995 law known as “borrower defense to repayment,” which provides federal loan forgiveness to students whose colleges lied to get them to enroll.
An Obama-era update of the statute lowered hurdles for students and shifted more of the cost onto schools, but DeVos tried to scuttle the update and then rewrite the rule. The Trump administration in September finalized its rewrite, which limits the time borrowers have to apply for relief and requires them to prove they were harmed financially by the deception. The rule is scheduled to take effect July 1.
Rep. Susie Lee (D-Nev.) urged her colleagues Friday to stand with students, not “bad-actor schools” that the Education Department refuses to hold accountable.
“It’s time to take a stand,” Lee, who introduced the resolution in the House, said Friday on the House floor. “Communities of color, minority and low-income students, veterans are preyed upon by predatory for-profit schools. They’re manipulated. They’re lied to. They’re defrauded.”
Lee and Sen. Richard J. Durbin (D-Ill.) led the effort to sideline DeVos’s policy by using the Congressional Review Act, which lets lawmakers overturn recent regulatory actions of federal agencies with a simple majority vote in both chambers. The Democrats introduced resolutions in their chambers days after the Trump administration finalized the rule.
The White House threatened to veto the resolution early on, but in March, Trump told Republican senators that he was “neutral” on the rule. Ultimately, the president sided with DeVos, the longest-serving member of his Cabinet.
Under its rewrite, the Trump administration is demanding that borrowers show their school engaged in an action or made a statement “with knowledge of its false, misleading, or deceptive nature or with a reckless disregard for the truth.” Even if students convince the department they were defrauded, they must still prove financial harm before loans are canceled.
The policy handed a victory to for-profit colleges that derided the Obama administration’s rules as harmful to their programs. The majority of borrowers seeking relief attended for-profit schools.
The closure of Corinthian Colleges and ITT Technical Institutes, for-profit chains, resulted in a deluge of claims at the Education Department. Both spent their final days fighting state and federal lawsuits over alleged fraud, deceptive marketing and efforts to steer students into predatory loans.
Obama administration officials granted relief to Corinthian students in waves, with the vast majority of approvals issued at the tail end of the administration. Democratic lawmakers criticized the administration, saying it was moving too slow, but Republicans accused it of making it too easy for people to shirk their loan obligations.
“For the first 20 years of the rule, there were 59 claims. Then the Obama administration begins encouraging frivolous appeals and the appeals jump to 300,000 and climbing,” Rep. Virginia Foxx (R-N.C.), the top Republican on the House Education Committee, said Friday on the House floor. “The Obama regulations created more chaos than clarity, and the Trump administration recognized immediately the need to right these wrongs.”
DeVos has defended her overhaul as a sensible and fair way to account for the needs of students, colleges and taxpayers.
A report released Thursday by the House Education Committee tells an different story. The 30-page report details the steps the Trump administration has taken to limit loan relief, using formulas that have been struck down in court or derided by economists as deeply flawed.
As it stands, the Education Department will grant full forgiveness only if a defrauded student earned far less than peers who pursued similar degrees at other schools. The policy is a stark contrast from the Obama administration’s practice of granting full relief when it determined a college committed fraud.
Before DeVos instituted the partial relief formula, defrauded borrowers received an average of $11,154 in loan forgiveness. That figure now stands at $523 on average, according to department data.
“Instead of using the department’s authority to make borrowers whole and give students a second chance at a quality education, it has gone out of its away to prevent victims of fraud from getting relief,” Rep. Robert C. “Bobby” Scott (D-Va.), chairman of the Education Committee, said on the House floor Friday.