Last Tuesday, a federal judge ordered that the United States Department of Education, headed by Betsy DeVos, must immediately implement a student loan forgiveness rule created under the presidency of Barack Obama.
Betsy DeVos, the US Secretary of Education, was previously sued by attorneys general from the District of Columbia and 19 states for interfering with a protection rule in favor of students. If she had not delayed its implementation, the rule would have taken effect July, 1st, 2018. This deadline was delayed by DeVos in what was alleged as an illegal maneuvering. The 19 states and District of Columbia asked the courts to immediately implement the Borrower Defense Rule, stating that DeVos had violated the Administrative Procedures Act because she had no legitimate reason for the delay. They also cited that she failed to allow adequate time for public comment and did not give proper notice to the appropriate persons about the delay. Our math tutors in Orange County have been monitoring this story closely, and have provided a summary of the case below.
The Borrower Defense Rule
The Borrower Defense Rule was created during the Obama-era to pave the way for loan forgiveness for student borrowers who were defrauded by unscrupulous schools using shady loan practices. This rule would qualify certain students for loan debt forgiveness, based on how and when their loans were obtained. For example, a student may qualify for federal student loan forgiveness if that student’s school employed deceptive or illegal practices to motivate him or her to go into debt in order to enroll.
Although critics of DeVos viewed the previous delay attempts by the Education Department as a win for many for-profit schools, DeVos has said that she also wants to assist students who were victimized by fraud or unscrupulous tactics. In June 2018, DeVos stated her position that all fraud is unacceptable, especially when perpetrated by a higher education learning institution. Nevertheless, she maintained that the Obama-era rule merely created a muddled process that visits unnecessary financial burden on taxpayers.
A New Rule
The Department of Education and DeVos stated that their goal is to find a balance between protecting taxpayers from having to foot the bill of government-mandated student loan forgiveness and protecting students from becoming victims of shady loan practices.
DeVos has proposed that this balance can be created with a new way to calculate student loan forgiveness. This new formula would ultimately erase a certain percentage of a person’s student loan debt based on the income of previous students who successfully graduated from the same or similar programs. The Education Department claims that this revised rule will save the federal government $12.7 billion more over the course of a decade when compared with the Obama-era rule.
The Education Department continues to work on this new rule that they believe is well-designed to protect borrowers and taxpayers alike. DeVos has also advocated for a stronger definition for fraud claims and supports mandatory arbitration measures between schools and indebted students.
No Additional Delays
The Education Department reports that as of June 2018, about 48,000 claims totaling approximately $535 million have been granted to students in need of debt relief. However, over 100,000 borrowers who attended for-profit colleges that are now defunct still await claims processing.
DeVos strongly argued for a delay in the Borrower Defense Rule, but the Education Department has stated that even though she believes the Obama-era rule “missed the chance to get it right” she will not seek additional delays in the future.