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Defrauded Students May Find it Difficult to Cancel Debts Under New Regulations

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The new set of higher education rules proposed by the Trump administration drew sharp criticism from various quarters across the United States. The critics fear that the new regulations would make it practically impossible for students who have been defrauded by higher education programs to cancel their debts.

According to the U.S. Department of Education, the new package of higher education regulations is aimed at protecting student borrowers, holding higher education institutions accountable for misrepresentation and fraud, and providing financial protections to taxpayers by at-risk institutions.

“Our commitment and our focus has been and remains on protecting students from fraud,”  Secretary of Education Betsy DeVos said. “The regulations proposed today accomplish that by laying out clear rules of the road for higher education institutions to follow and holding institutions, rather than hardworking taxpayers, accountable for making whole those students who were harmed by an institution’s deceptive practices.”

Various groups voiced their opposition against the proposal fearing it would constitute a reversal from the strong protections issued under the Obama administration in the wake of scandals at for-profit schools like Corinthian College and ITT Tech.

“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,” said Suzanne Martindale, a senior attorney for Consumers Union.

Martindale says that the proposed regulations will shield poor-performing schools from being held accountable.

“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,” she added.

James Kvaal, President of The Institute for College Access & Success, said that the proposed rules impose new evidentiary burdens on harmed borrowers, so that very few will get the relief they are entitled to by law.

“The message to students behind today’s proposal to rewrite the 2016 borrower defense rule is loud and clear: you’re on your own. It would deny nearly $13 billion in relief to students,” Kvaal said.

“Ignoring the abuses of students by colleges isn’t just unwise, it’s also contrary to the values and priorities of the American public, which overwhelmingly supports canceling loans of students deceived by their colleges,” he added.

Vanita Gupta, president and CEO of The Leadership Conference on Civil and Human Rights, stressed that the draft rules would further exacerbate inequalities, making the student loan servicing system even more harmful to all students – particularly to borrowers of color.

“The department’s message to student borrowers is clear: we no longer have your back. Giving predatory for-profit colleges and student loan servicers a license to cheat and defraud generations of students is an abdication of that responsibility,” Gupta said.

California Attorney General Xavier Becerra also decried the Trump Administration’s gutting of the original rule.

“The Borrower Defense Rule is meant to protect students, but Education Secretary Betsy DeVos now proposes a much weaker alternative that fails to support the interests of our sons and daughters,” he said.

The California Department of Justice will vigorously oppose the new rule, Becerra added.

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