The Department of Education proposed a new set of rules aimed at easing the debt relief application process for students bilked by for-profit colleges.
The initiative, revealed this week, would bar corporate schools from making prospective students relinquish their rights to sue—whether individually or in class action lawsuits. It would also grant the department more authority to discharge a group of students’ loan obligations, when it is determined they have been deceived by school administrators.
The rules, if finalized, would also force for-profit schools to disclose to students when they are financially troubled. They will also give the Department authority to order misbehaving companies to post collateral, to demonstrate a school’s financial stability.
“We won’t sit idly by while dodgy schools leave students with piles of debt and taxpayers holding the bag,” Secretary of Education John King Jr. said in a statement. “All students who are defrauded deserve an efficient, transparent, and fair path to the relief they are owed, and the schools should be held responsible for their actions.”
The move comes more than a year after the Debt Collective, a group representing 15 defrauded students, organized a payment strike against Corinthian Colleges. The school eventually went bankrupt in 2015, after it was sued in multiple jurisdictions by a variety of regulators for predatory and fraudlent practices.
The Debt Collective demanded the department unilaterally grant assistance under an arcane rule called “defense to repayment.” The Obama administration, they said, failed students by allowing systemic fraud to take place; and that it should make things right by absolving ripped-off students from their obligations on federally-funded loans.
“I got a piece of paper I can wipe my butt with,” Alicia Stevens, a 59-year-old member of the group told The Sentinel in February. Stevens, a graduate of a Corinthians school, said she was $33,000 in debt and struggling to make payments.
“It’s not just some whiny millennials, which is what we often hear,” collective member Ami Schneider also noted. The group came to DC last winter–with its ranks having increased to 200 members–to protest against Department of Ed inaction and impending rules it said was insufficient. “Fraud is fraud,” Schneider said.
On Monday, the collective offered qualified and cautious praise of the department’s new rule proposal, noting it does “some good.”
“Whether collective relief is available for any group of students will be totally up to the Department,” it said in a statement. “We don’t trust them to do the right thing.”
The organization noted, for example, that debt discharges will be limited “for students who got ‘some value’ out of their educations.”
“Who has the authority to determine which students got value out of their degrees and which didn’t?” the Debt Collective asked. “We don’t believe for-profit college degrees offer any value to students that they couldn’t have gotten for a much lower cost somewhere else.”
On the other side of the spectrum, industry lobbyists decried the proposal as capricious. The CEO of Career Education Colleges and Universities, a corporate school trade association, said he supported regulations, just not those proposed.
“We agree that poor-performing institutions, as well as those institutions that are financially at risk, should be monitored closely to protect students,” Steve Gunderson said. “But what the department fails to acknowledge is that these issues exist across all of higher education, not just private-sector institutions.”
For-profit colleges are heavily subsidized by the US government in the form of federal tuition assistance. Rules cap the amount of public revenue for-profit schools are allowed to receive at 90 percent of overall inlays. In 2014, the Department of Education reported that 27 different schools were breaking that threshold.
