What the Ed Department’s New Rules for Debt Forgiveness Requirements Mean to You
The Trump administration is proposing to change the requirements for defrauded students to forgive student loan debt, tightening requirements for those who claim to be defrauded.
The proposed rules, which will allow the Department of Education to accept public comments next month, change the current Obama-era rules that allow borrowers with federal student loans to forgive their debts if they were misled about the “cost and quality” of their education. It was this ruling that the Obama White House used to ease the debt burden of Corinth college students in 2015.
According to the Wall Street Journal , this is what the newly proposed rules will do:
Under one option, the department may require students applying for a loan waiver to defaults, rather than allowing students to apply for forgiveness while they remain in good financial condition.
Alternatively, students will continue to submit “affirmative” applications, although the faculty will consider these statements at a higher level. Either way, former students will have to show that their colleges had “intent to cheat” or displayed “recklessness” in their advertising or hiring efforts.
It will also give students less time to file a lawsuit and prevent state attorneys general from filing class actions. The magazine reports that the Ed Department is also considering changing the standard of proof for students from “evidence prevailing” to “clear and persuasive,” so that their loans are forgiven, a higher threshold.
According to Consumer Reports, critics of the current rule – primarily commercial institutions and historically black colleges – say it’s too vague. Education Minister Betsy DeVos said the proposed changes “would better balance the need to protect borrowers from fraud and the need to protect taxpayers from the costs of frivolous claims,” according to CR.
Opponents of the proposed changes say they will primarily harm veterans, minorities and people from low-income communities.
And this comes at a time when the Bureau of Consumer Financial Protection is also cutting back on student loan fraud investigations as students accumulate more debt and fraud .
So what can you do? For now, CR recommends the following steps:
Understand the requirements. Visit the Department of Education’s website for information on how to file a claim under the Borrower Protection Rules. You will find an online application form, qualification instructions, and the information you need to provide.
Keep track of your status. If you are filing a grievance, you can check the status of the grievance on the Ministry of Education’s Borrower Defense Hotline at 855-279-6207.
Beware of scammers. So-called debt relief companies prey on student loan recipients to help you pay off loans or to qualify for student loan write-off programs for a hefty fee. You never have to pay to file a loan cancellation claim. Visit the Department of Education’s Student Aid website for a list of legitimate student loan service and collection companies and tips on how to avoid student loan scams. The FTC also maintains a list of debt relief companies it has taken action against.
If approved, the changes will apply to federal student loans received on or after July 1, 2019.