Betsy DeVos Proposes Cuts to Loan Forgiveness for Defrauded Students

July 25, 2018, 7:41 PM UTC

Education Secretary Betsy DeVos proposed changes to the department’s loan forgiveness program Wednesday that will make it harder for students who have been defrauded by their universities to receive loan forgiveness.

The program was expanded under the Obama administration, but DeVos announced the changes just before Obama’s policies were set to go into effect.

Under the new policy, student borrowers will have to prove that they’re financially distressed or prove that their university intentionally misled them in order to receive loan forgiveness, the New York Times reports. Schools will also have a chance to defend themselves against fraud claims under this new policy, and they’ll be allowed to have students sign arbitration agreements barring them from suing the university.

The Obama-era policies, which would have provided much wider protections for students, were finalized after two for-profit universities, Corinthian Colleges and ITT Technical Institute, were found to have misled their students with false advertisements, leading them to take out loans for an invaluable education before shutting down in 2015 and 2016.

The current U.S. Department of Education argues that while students should be protected from fraud, they should also consider their options when selecting a university. “Postsecondary students are adults who can be reasonably expected to make informed decisions if they have access to relevant and reliable data about program outcomes,” said the department, ABC News reports.

“While students should have protections from predatory practices, schools and taxpayers should also be treated fairly as well,” DeVos said back in 2017, according to The Detroit News. “Under the previous rules, all one had to do was raise his or her hands to be entitled to so-called free money.”

The proposed changes have been championed by those in the for-profit education sector, but criticized by advocates for student borrowers. ABC reports the changes would save an estimated $13 billion over the next decade compared to the Obama administration’s policies, primarily through cutting loan relief. The department says it has received more than 100,000 student borrower defense claims in the past three years.

“The Department of Education is turning a blind eye to widespread fraud and abuse at for-profit schools that left thousands of students in debt without a meaningful education,” Suzanne Martindale, a senior attorney for Consumers Union, told Times. “Instead of helping defrauded students cancel their debts and move on with their lives, these proposed rules would shield poor-performing schools from being held accountable for their misconduct.”