Published: August 2016

Help for defrauded students and taxpayers

The U.S. Department of Education has proposed reforms to provide debt relief to students defrauded by unscrupulous colleges, like Corinthian Colleges, and to hold these colleges accountable so that they, not taxpayers, pay for their wrongdoing. The proposed new rules improve protections for students and taxpayers and will help curb bad behavior by predatory colleges. But the rules need to be strengthened. As written they also roll back eligibility for student loan relief, in some cases, and make it likely that many defrauded borrowers will get partial or no relief.

Under federal law, students are eligible for loan discharges when they are defrauded by schools like Corinthian Colleges that seek to profit from federal student loans, grants and veterans' benefits at student and taxpayer expense. Until recently, this right has not been widely publicized and few borrowers have gotten the relief they are entitled to.

The Department of Education has proposed new rules to clarify and strengthen some protections for defrauded federal student loan borrowers. These rules will help curb bad behavior by predatory colleges. However, the rules would also roll back eligibility for debt relief, in some cases, and make it likely that many defrauded borrowers will get partial or no relief. The Department deserves praise for proposing regulations to better protect students and taxpayers from fraud and other misconduct by unscrupulous colleges, but the new rules need to make it easier for borrowers to get full relief. The proposed rules should be strengthened to:

• Provide full loan relief to defrauded students
• Ensure loan relief is automatic when there is sufficient evidence of school wrongdoing
• Make the federal standard for relief a floor, not a ceiling that eliminates current borrower eligibility for relief
• Ensure unscrupulous schools cannot prevent students from holding schools accountable in the courts
• Improve the warnings for students regarding concerns about their school
• Do not impose new time limits on borrower relief

Lead Organization

The Institute of College and Success (TICAS)

Other Organizations

AFSCME | Air Force Sergeants Association (AFSA) | American Association of University Professors (AAUP) | American Association of University Women (AAUW) | American Federation of Labor-Congress of Industrial Organizations (AFL-CIO) | Americans for Financial Reform | Association of the United States Navy (AUSN) | Center for Public Interest Law of the University of San Diego | Center for Responsible Lending | Children's Advocacy Institute of the University of San Diego | Consumer Action | Consumer Federation of America | Consumer Federation of California | Consumers Union | Demos | East Bay Community Law Center | The Education Trust | Empire Justice Center | Equal Justice Works | Faculty Forward Network | Generation Progress | Higher Ed, Not Debt | Housing and Economic Rights Advocates | The Institute for College Access & Success | The Leadership Conference on Civil and Human Rights | League of United Latin American Citizens (LULAC) | Legal Services NYC | Maryland Consumer Rights Coalition | NAACP | National Association for College Admission Counseling | National Association of Consumer Advocates | National Center for Law and Economic Justice | National Consumer Law Center (on behalf of its low-income clients) | National Consumers League | National Council of La Raza (NCLR) | National Education Association (NEA) | National Women Veterans Association of America | New York Legal Assistance Group (NYLAG) | NYPIRG | Project on Predatory Student Lending of the Legal Services Center of Harvard Law School | Public Citizen | Public Counsel | Public Good Law Center | Public Law Center | Service Employees International Union (SEIU) | Student Debt Crisis | Student Veterans of America | U.S. Public Interest Research Group (U.S. PIRG) | United States Student Association (USSA) | Veterans Education Success | Veterans for Common Sense | Veterans' Student Loan Relief Fund | VetJobs | VetsFirst, a program of United Spinal Association | Woodstock Institute | Young Invincibles

More Information

For more information, please visit TICAS.

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Help for defrauded students and taxpayers   (Comment_FINAL_August1_2016.pdf)