A U.S. district court ruled Oct. 16 that Obama-era rules to protect student loan borrowers defrauded by colleges will take effect without further delay.
Initially slated for July 1, 2017, this policy was put on hold by Education Secretary Betsy DeVos, who said the rules made it too easy for borrowers to have their student loans canceled.
With this new ruling, the delay has come to an end, meaning that students who attended predatory for-profit schools might now qualify for cancellation of their student loans.
No more delays: Borrower defense to repayment will take effect
The legal decision impels the Department of Education to enact borrower defense to repayment, a policy approved during the Obama administration that offers student debt forgiveness to students found to have been misled by for-profit schools.
Critics of the decision to delay the policy say these schools target vulnerable populations such as veterans and those living in poverty, with former for-profit college enrollment officer Tressie McMillan Cottom telling NPR that these groups are the focus because they “qualify for the maximum amount of student aid.”
The policy is meant in part to address cases in which students take on debt to attend but leave without the skills or certifications they were promised or credits that could transfer to another institution. CNN cited an estimate from The Century Foundation that more than 1,400 schools closed between 2013 and 2015 and meet this description, and that their former students might now be eligible for loan forgiveness.
Almost 48,000 claims for debt forgiveness have been granted so far, most of which were processed under the Obama administration. Currently, 106,000 applicants are waiting for a decision, which should come faster with this latest ruling.
Consumer advocates celebrate ruling; conservatives uncertain
The latest court ruling is a major victory for students, according to consumer advocates.
“Today’s decision is a huge win for defrauded borrowers around the country,” said Julie Murray, an attorney who represented students who sued the Department of Education, in a statement after the announcement. “The rule is finally in effect. No more excuses. No more delays.”
Murray added, “Industry will continue to challenge the rule in court, but we will work as long as it takes to defeat those corporate interests and an administration beholden to them.”
But while students and their advocates support the ruling, it represents a defeat for DeVos and her fellow conservatives, many of whom claim loan cancellation could hurt taxpayers.
Although DeVos’ office said it wouldn’t argue against the ruling, it signaled that it intends to revise these regulations.
“Regardless of what the court decides, many provisions of the 2016 regulations are bad policy, and the department will continue the work of finalizing a new rule that protects both borrowers and taxpayers,” DeVos spokesperson Elizabeth Hill said in a statement.
The policy is one of many dealing with borrower protections that the Department of Education under DeVos has sought to roll back.
News comes on the heels of startling student loan statistics
Student protections such as the borrower defense to repayment policy are more important than ever, as the national student loan debt burden has never been heavier.
According to a report by Bloomberg based on data from the Federal Reserve, student loan debt, which stood at $1.5 trillion as of mid-2018, is the only debt category that has grown continuously since the Great Recession.
Student loan debt has increased by 157% in the past 11 years, while mortgage and credit card debt have gone down.
At the same time, rates of student loan delinquency and default have seen increases. This time last year, there were 4.6 million student borrowers in default on their educational debt.
Find ways to protect yourself as a student loan borrower
If you think you qualify for borrower defense to repayment, you can complete the application on Federal Student Aid.
You will need to provide documentation to support your case, including transcripts, enrollment agreements, promotional materials from the school and the school’s course catalog. If you have questions, contact your loan servicer or [email protected] for guidance.
More generally, if you have student loans, educate yourself about your options for repayment and forgiveness. There are a variety of ways to get your loans discharged or forgiven, especially if you commit to working in a public service organization or a high-need area. Plus, some employers now offer a student loan repayment assistance benefit to help employees shed their debt.
Even if you don’t qualify for loan forgiveness, you could adjust your payments on an income-driven repayment plan or extended repayment plan. Or if your budget allows, you could make extra payments to get out of debt faster.
Many consider our national student debt to be a crisis, and Federal Reserve Chairman Jerome Powell has said it has long-term negative effects on borrowers and could hurt economic growth. But by finding the right strategy for your debt, you can avoid default and the harmful consequences that go with it. And hopefully, U.S. education officials will implement rules to help borrowers manage their debt and not stand in their way.