Education Department may slash by 60% the loan relief it gives to defrauded students

The Education Department’s plan to provide only partial loan forgiveness to some students defrauded by for-profit colleges could reduce overall relief payments by about 60%, according to a preliminary analysis obtained by the Associated Press.

The agency announced in December that it was discontinuing the Obama administration’s practice of fully wiping out the loans of students deceived by the now-defunct Corinthian Colleges under the borrower defense rule.

The department said some students will now be getting only partial loan forgiveness to make the process fair and to protect taxpayers from excessive costs. The agency will look at average income for specific programs to determine if the loans should be forgiven fully or partially.

A department document drafted in the fall and viewed by the AP shows that such an approach could cut the overall amount of relief granted to students by about 60%. To arrive at the initial estimate, officials looked at student loans that had been forgiven in their entirety to determine the effect had partial relief been granted.

“This is not an official calculation from the Department of Education,” Education Department press secretary Liz Hill said in a statement Tuesday. “It is an impossible calculation to make at this stage in the process as we continue to adjudicate claims.”

Critics said the idea of partial relief was unfair since thousands of Corinthian students had already had their loans canceled in full under President Obama. The agency said in December that it had tens of thousands of claims from Corinthian students pending. Corinthian operated schools under its Everest, Heald and WyoTech brands before collapsing in 2015.

Education Secretary Betsy DeVos is rewriting regulations governing student protections with regard to for-profit schools. Last year she froze two Obama-era rules that were meant to put additional checks on for-profits. Critics point to the Trump administration’s ties with the for-profit sector and accuse the department of protecting industry interests, but DeVos says the Obama-era rules were too broad and could be misused at taxpayers’ expense.

Eileen Connor, a litigator at Harvard University’s Project on Predatory Student Lending, which has represented hundreds of defrauded Corinthian students, criticized the projections.

“I think that is terrible. It’s another example of the Department of Education picking the side of fraudulent schools and not doing right by those who have been hurt by them,” Connor said.

Rick Hess, director of education policy at the conservative American Enterprise Institute, praised the program, saying it defends the interests of taxpayers.

“If I borrow money and I go to a college in which I don’t get a good education or don’t receive a diploma, should any of that responsibility lie with me?” Hess said. “What I see here is the department trying to responsibly determine when individuals are defrauded and when they should be responsible for the funds they borrowed.”

When announcing the partial relief program, DeVos said, “No fraud is acceptable, and students deserve relief if the school they attended acted dishonestly.” But she added that the process also “protects taxpayers from being forced to shoulder massive costs that may be unjustified.”