Education Department proposes changes to student loan rules

The Department of Education on Wednesday released a set of proposed rules to simplify federal loans, making it easier for students and public service workers who attended fraudulent colleges to get loan forgiveness.

The proposed rule includes changes to the Borrower Defense Program and the Civil Servant Loan Forgiveness Program, both of which have been criticized for being too complicated and lengthy application and review processes.

“This announcement is part of the government’s ongoing effort to make the student loan program work. It’s the result of a strong proposal to hold educational institutions accountable,” said James Kvaal, Undersecretary of Education. “The proposal will also help prevent future debt crises by leaving students with outstanding debt and holding universities accountable for losing good jobs.”

Proponents see the proposed changes as a step toward making the overall student loan system more effective and affordable through targeted reforms.

“These look like policy changes that we support,” said John Fansmith, vice president for government relations at the American Council on Education. “They may be smaller or less noticeable than what is often talked about, but these kinds of changes can help many students, especially those scarred by their experiences in higher education, find a way forward. increase.”

Others, however, are critical of the department’s proposals to increase accountability for rogue universities, believing the department has gone too far.

“I think the department has greatly exceeded their mandate by submitting this type of proposal,” said Jason Altmire, president of Career Education College, which represents the for-profit division.

The proposed rule will be subject to a 30-day comment period, with proposed amendments due by the November 1st deadline. The earliest the new rules could come into force is he July 1, 2023. Kvaal also said an additional set of rules will be announced later this summer, including “ensuring that student loan payments are affordable and that incarcerated individuals have access to Pell Grants.” said. Creating quality programs, holding institutions accountable for inefficient private conduct, and processes when universities change ownership. “

borrower’s defense

The ministry has proposed a set of rules to simplify defending borrowers. This is a federal program that allows borrowers who have been deceived or misled by colleges to apply for student debt forgiveness. The new rule sets a clear path for applicants through a single “streamlined” application while also requiring universities to recoup the cost of loan payments to prevent such cases in the future. Create a new accountability mechanism. These changes apply to all future and pending defense claims against borrowers as of July 1, 2023.

Additionally, if multiple claims in the defense of the borrower are filed against the same university, these claims will be considered as a group rather than on a case-by-case basis.Recent department Approximately 560,000 people issued mass discharges A borrower who attended the now-defunct Corinthian College.

It also creates a new clear standard for fraud by colleges, allows borrowers to qualify for defense, and creates a new category: offensive and deceptive soliciting.

The commercial sector, which generates the majority of defense claims against borrowers, is dissatisfied with the proposed changes and does not give universities a fair chance to respond to defense claims against borrowers in a manner that ensures due process. claims that

“This is a clear attempt by the department to weaponize the rule-making process specifically aimed at certain areas of higher education,” Altmaier said.

However, Justin Draeger, president of the National Association of Student Financial Aid Administrators, said: “There is a need for a timely adjudication of borrower claims against schools that knowingly mislead students, and for ensuring schools are fair. It’s important to have rules that balance.” You have the opportunity to respond to those allegations. “

Under the proposed rule, the Department of Education will only have conversations with colleges during pleadings of defense from borrowers if they are trying to get their money back. The proposed rule also creates a clear process by which departments can request that the university cover the cost of loan forgiveness for former students.

Last week, the department announced a settlement to write off the debt of 200,000 borrowers who attended more than a dozen colleges the department found had misled students about the program.

Public service loan exemption

The department also proposed changes to the PSLF that would streamline the application process and create an automated tracking process for eligible payments and reapplications.

The proposal clarifies the types of employees who qualify for the PSLF. This includes a provision for calculating qualification hours for professors without tenure. The proposal also creates a pathway for the department to automatically identify and begin tracking the civil servant’s progress toward her PSLF, whenever possible.

The agency did not say whether it is considering extending the PSLF exemption beyond the current Oct. 31 deadline. Some supporters want early implementation of his proposed PSLF rule, allowing borrowers making student loan payments to count those payments against his PSLF.

Other proposed changes

The Ministry of Education has also proposed other changes.

  • arbitration: The Department of Education has proposed banning universities from requiring borrowers to sign arbitration agreements. This is a common practice used by for-profit universities during the admissions process to prevent borrowers from participating in litigation based on claims in the borrower’s defense. We will also establish an intra-departmental database that requires the university to disclose when it was filed against the university and when the borrower’s defense claims were filed against the university.
  • Interest capitalization: The department recommends eliminating interest capitalization from most federal student loan programs, except those requiring interest capitalization by law, when unpaid interest is added to the principal amount of the student loan. I suggested. Interest capitalization increases the borrower’s loan balance by accumulating future interest on the principal inflated by added interest.
  • Totally Disabled and Permanently Disabled Discharge: The proposed rule would allow fully or permanently disabled borrowers to receive loan forgiveness by expanding the scope of disability status and eliminating the three-year monitoring period used to track a borrower’s income after being laid off. establish new ways to receive
  • Closed University Discharge: Students with outstanding federal student loan debt who attended a closed college will automatically receive a waiver unless they enrolled within 180 days of the college closing and graduated under the proposed rules. This is a significant change for students who attended colleges that closed but were not awarded degrees and left with outstanding debts.
  • False proof: The proposed rule would create a streamlined process for borrowers who are ineligible for federal student loans but have been falsely certified by colleges for federal student loans to obtain forgiveness.

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