The Department of Education has proposed changing the rules for student loans

The Department of Education on Wednesday unveiled a series of proposed rules that would ease federal debt, to make it easier for those who attend fraudulent colleges or those who are public service workers to get debt forgiveness.

Proposed rules include changes to the Borrower-Protection Program and the Public Service Loan Forgiveness Program, both of which have been criticized for being too complex and lengthy to apply and review.

“This announcement is part of the administration’s continued commitment to working on the student loan program. They are the result of more than a year of effort to get input from the student support community and strong proposals that will better serve students and hold institutions accountable, ”said James Kowal, Under Secretary of Education. “The proposals will help prevent future debt crises by holding colleges and universities accountable for leaving students without outstanding loans and good jobs.”

Proponents see the proposed changes as a step towards improving the overall student loan system to become more effective and affordable through targeted reforms.

“These look like the kind of policy change we’re going to support,” said John Fansmith, vice president of public relations for the American Council on Education. “These may be shorter or lower profile than the topics they are often talking about, but these kinds of changes help many students, especially those who are harmed by their experience in higher education, find a way forward.”

Others, however, criticize the department’s proposal to increase the accountability of fraudulent colleges and believe the department is overstepping.

Jason Altmeyer, president of Career Education Colleges and Universities, which represents the for-profit sector, said:

The proposed regulations will go through a 30-day comment deadline, and amendments to the proposal will be made before the November 1 deadline. The new rules may first come into effect on July 1, 2023 Kvaal added that an additional set of proposed rules would be announced later this summer, including “ensuring that student loan payments are affordable, that prisoners have access to pay grants, high-quality programs, and that institutions are responsible for incompetent personal conduct.” And colleges create the process to change owners. “

Borrower defense

The department has proposed a set of rules that would simplify borrower defense ্রাম federal programs that allow borrowers who have been deceived or misled by the college to apply for student loan waivers. The new rules will set a clear path for applicants through a single, “flowing” application and create new accountability mechanisms to prevent such lawsuits in the future by recovering the cost of disbursing loans to colleges. These changes will apply to all future and pending borrower-defense claims until July 1, 2023.

Additionally, when multiple claims for debtor defense are filed against the same college, these claims will be treated as a group, not on a case-by-case basis. The department recently issued a group discharge for about 560,000 borrowers who attended the now-defunct Corinthian colleges.

This will create a new, clear standard for college misconduct that could qualify a borrower to defend a borrower and create a new department: aggressive and fraudulent recruitment.

The for-profit sector, which generates mostly borrower-defense claims, is dissatisfied with the proposed changes and argues that colleges are not given a fair opportunity to respond to borrower-defense claims in a way that ensures due process.

“This is a clear attempt by the department to arm the rule-making process, especially targeting a sector of higher education,” Altmeyer said.

But Justin Drager, president of the National Association of Student Financial Aid Administrators, said it was important that there was a rule “that balances the need for timely litigation against borrowers’ claims against schools that deliberately mislead students and then deprive schools of the right to complain.” There is. ”

Under the proposed regulations, the Department of Education will only engage in negotiations with a college during a borrower-defense claim if they attempt to recover the money. The proposed regulations will also create an explicit mechanism through which the department can request that a college cover the cost of loan discharge for its alumni.

Last week, the department announced an arrangement that would cancel loans to 200,000 borrowers who attended more than a dozen colleges that were found by the department to confuse students about their program.

Public service loan waiver

The department has also proposed changes to the PSLF that will simplify the application process as well as create a mechanism for automatic tracking of eligible payments and re-applications.

The proposal clarifies the types of employees who qualify for the PSLF, including a provision that would calculate eligibility time for unprepared professors. The proposal will also pave the way for the department to start automatically identifying and tracking the progress of government employees towards PSLF, whenever possible.

The department did not say whether it was considering extending the PSLF clearance beyond the current October 31 deadline. Some lawyers are hoping for speedy implementation of the proposed PSLF rules so that borrowers can calculate those payments to the PSLF by paying off their student loans.

Other proposed changes

The education department has also proposed other changes.

  • Arbitration: The Department of Education has proposed prohibiting colleges from forcing borrowers to sign arbitration agreements, a common practice used by for-profit colleges during the admissions process that prevents borrowers from participating in a lawsuit based on their borrower-defense claims. It will also establish a database within the department for which colleges are required to disclose when arbitration agreements are used and when a borrower-defense claim is filed against a college.
  • Interest Capital: The department has proposed to exclude interest capital, except for those that require statutory capital by statute, adding unpaid interest to the principal amount of student loans from most federal student loan programs. Interest capital causes a borrower’s debt balance to increase because future interest is deposited on a principal that is inflated by excess interest.
  • Total and permanent disability discharge: The proposed rules would provide new avenues for borrowers who fully or permanently extend the scope of disability status in case of disbursement and exclude the three-year monitoring period which is used to track a borrower’s income after discharge.
  • Closed college vacation: Students who are in arrears of federal student loans who have joined closed colleges will be automatically forgiven until they are registered within 180 days of closing the college and graduate under the proposed rules. This is an important change for those who have joined college who have closed but have not been awarded a degree and have gone out with outstanding debt.
  • False Certification: The proposed rules would create a streamlined process for borrowers who are not eligible for a federal student loan, but were falsely certified by their college for a federal student loan to be forgiven.

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