Feds open student-loan forgiveness possibility
An effort to have student loans forgiven in the case of misrepresentation or fraud got a new push Friday with the announcement that the U.S. Department of Education has rewritten regulations to help consumers.
"These regulations provide a clear path to relief with all of their rights intact, and restore their right to sue," U.S. Under Secretary of Education Ted Mitchell said in a statement.
The Obama administration's new rules giving students financial relief came after an outcry from citizens sucked into loans from Corinthian Colleges, a for-profit institution that closed last year after being cited for predatory practices. Officials have said student loan forgiveness for Corinthian alone could cost taxpayers as much as $3.6 billion.
A federal investigation found that Corinthian schools charged huge fees, pumped up their graduates' job-placement results and at times had students fib on forms to get higher financial aid packages.
U.S. Sens. Chris Murphy and Richard Blumenthal, both Connecticut Democrats who pushed for reforms, applauded the administration's decision to allow for automatic discharge of student loans. They also were encouraged that colleges will now be barred from forcing students to sign documents waiving their right to sue the schools in what is known legally as pre-dispute arbitration clauses.
The new rules allow for automatic discharge in the case of student loans closed on or after Nov. 1, 2013, if they have not re-enrolled in another school within a three-year period.
"The new rules out today strengthen students' hands when they're victimized by shady for-profit colleges," Murphy said in a statement.
Blumenthal said the rules will provide a "clear, fair process" for colleges to be held accountable for actions that amount to "preying upon (students') dreams of a higher education."
But Murphy said the rules could have gone further, penalizing the executives of for-profit colleges that fraudulently add to student debt.
"I'm going to keep fighting on the Education Committee to pass my Students Before Profits Act because it's inexcusable that these predators are allowed to skate after knowingly, and sometimes intentionally, defrauding students," Murphy said in a statement.
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