DOE Weakens Borrower Defense Rule

July 27, 2018

Yesterday the Department of Education (DOE) issued new regulations that significantly weaken the existing borrower defense rule. The borrower defense rule, which went into effect in 2016, gave students who were victimized and defrauded by predatory for-profit colleges (including  Corinthian Colleges and ITT Educational Services ) a way to get their student loans discharged under certain circumstances.

The new, rewritten rules make it harder for defrauded students to get relief from their student loans and easier for the schools to avoid paying student claims. The changes  include forcing students to arbitrate their claims (i.e., denying them the right to file lawsuits in courts), prohibiting students who file for arbitration from discussing their arbitration proceedings with other students and denying them the right to join in class actions with other students.

The Century Foundation  has an excellent article describing  several ways  the new rules harm students who took out student loans to pay for predatory for-profit colleges:

  1. It’s now harder for defrauded students to file claims in court.
  2. Students who have existing loans and who want to apply to the DOE under the borrower defense rule must now be in default in order to apply.
  3. The new rules make it more difficult for students to show they are entitled to relief by removing certain grounds for asserting a borrower defense and raise the burden of proof for students who apply for relief.
  4. Students are now required to apply for relief separately (a group discharge process was available under the old rule).
  5. The changes end the existing process whereby DOE would automatically discharge student loans for eligible students when the for-profit school they attended was closed.
  6. The new rules expressly allow schools to intimidate and threaten students who apply for relief under the borrower defense rule through the use of retaliatory tactics, such as withholding or refusing to verify their transcripts.

Although the new DOE rules make it harder to get student loans discharged, students who attended for-profit schools may still have claims against their school for violating our consumer protection laws. Many of these schools made false and deceptive promises about the quality of their programs and the ability of students to get jobs in their field of study.

If you attended a for-profit college or are struggling to pay your student loans, I may be able to help. Please contact me. There’s no charge for an initial consultation.

 

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