Department of Education to Negotiate Plan for Student Loan Relief

Posted By Eliana Osborn on February 2, 2016 at 4:45 pm
Department of Education to Negotiate Plan for Student Loan Relief
Acting Secretary of Education John B. King, Jr. at the White House last month. Cheriss May, AP Images.

Individual settlements have been reached with several for-profit colleges accused of misleading students.  But that only affects a very small portion of the more than $1 trillion student loan industry.  Millions of borrowers are still struggling to repay loans, putting their financial futures in jeopardy.

The Department of Education is currently in talks with stakeholders like borrowers, school representatives, state officials, and consumer advocates about options for student debt relief.  Three rounds of negotiations are planned to come up with a plan for situations in which the DOE will cancel loan debt.

For Corinthian Colleges students, 2015 was a year of chaos.  Most of the for-profit college’s campuses closed, students were unable to finish degree programs they had started, and yet many still owed money in loan repayment.  Students who can prove they were defrauded—through dishonest recruiting and other illegal practices—are eligible for loan cancellation.

The current DOE goal is to streamline the process for how loans can be eliminated when things go awry like they did with Corinthian.  The Higher Education Act was recently reauthorized by Congress without changes to the section called “borrower defenses.”  That’s where claims for federal loan forgiveness or cancellation come in.  Since most student loans are made through public funds, individuals have sought redress from the system itself.

The Obama administration has pledged to improve transparency in higher education lending, as well as strengthen accreditation procedures for colleges.  These moves should do more to protect students from borrowing money for schools that will provide little, if any, benefit to them in the long term.

According to Inside Higher Ed, the goal of the debt relief panel is this: “Among the issues that negotiators will take up is precisely what the standard for debt relief ought to be – and whether it should be uniform across the country. The department’s current rules, which were written during the Clinton administration, call for a federal student loan to be discharged if the student’s college violated a state law, which can vary widely.”

State attorneys general are bringing cases against colleges more frequently than ever before.  However, most cases end in settlement, without schools admitting wrongdoing.  That leaves borrowers in limbo as to whether they qualify for debt relief.  Corinthian College students have cases still pending after six months or more, while interest continues to accrue on their loan balances.

As the DOE hammers out a clear path for student loan relief, they must identify who will be eligible and how that will be proved.  They will also need to decide if the new rules will only apply to new borrowers or can be applied retroactively.  No matter how quickly they settle on a plan, nothing is expected to be in place before the 2016 presidential election.  For students, however, implementation can’t come quickly enough.

Eliana Osborn
Eliana Osborn is an associate English professor at Arizona Western College, with degrees from Brigham Young University and Northern Arizona University. She’s published widely in forums such as The New York Times, the Washington Post, the Christian Science Monitor, and the Chronicle of Higher Education.

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