Defend defrauded students who were scammed by their school!

Wednesday, August 08, 2018

With new proposed borrower defense rule, Department of Education tells defrauded students, “You’re on your own.”

The Department of Education has recently announced its intent to roll back a federal student loan forgiveness program meant to help students who were scammed by predatory for-profit colleges. The new proposal would make consumers more vulnerable than ever to getting ripped off by these corrupt institutions.

The Department of Education’s “borrower defense” proposal, which would apply to students seeking loans after July 1, 2019, would make it dramatically harder for defrauded students to receive debt relief. Borrowers would need to first default on their student loans before they could apply for debt relief, effectively ruining their credit and financial health!

The rule sends a clear message to predatory institutions that they have nothing to worry about as they continue to scam and deceive those trying to make a better life for themselves and their families through higher education.

Tell the Department of Education that the current proposal fails to adequately hold scam institutions accountable for their actions and forces students and taxpayers to pay the price for the schools' deceptive and fraudulent behavior.

To submit your comment to the Department of Education on regulations.gov, follow these directions:

1. Copy the sample letter below.
2. Then click here and paste the letter into the comment box. (Please be aware that your comment and name will become part of the public record.)
3. Edit comment letter as you see fit, fill in your name and click continue to submit your comment.
4. The deadline to submit comments is August 30.

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Re: Docket ID ED-2018-OPE-0027

Dear Secretary DeVos,

The Department of Education’s borrower defense proposal (to dramatically alter the existing borrower defense rule) fails to protect students and taxpayers from being defrauded by unscrupulous educational institutions. As it stands, the Department’s proposed rule sends a clear message to predatory institutions that they have nothing to worry about as they continue to scam and deceive those trying to make a better life for themselves and their families through higher education.

Make no mistake: The victims of this inadequate rule will be veterans, single parents, those who are the first in their families to attend college and other vulnerable populations.

If passed, this rule will make it dramatically harder for defrauded students to receive debt relief. Borrowers would need to first default on their student loans before they could apply for relief, effectively ruining their credit and financial health!  

Rather than simply having to prove that the program they attended breached its contract, or being able to use a court judgment of fraud to discharge their loans, defrauded students would need to bring a higher burden of proof than is required even of private litigants. This is outrageous! Any claims filed against a school would also require plaintiffs to divulge an unprecedented amount of personal information, which appears intended to deter them from seeking justice in the first place.   

Adding insult to injury, the proposed rule also allows higher education programs to incorporate forced arbitration clauses into their enrollment agreements, denying students who were defrauded their day in court.

Widespread for-profit school closures, like those of Corinthian Colleges, ITT Technical Institute and, most recently, The Art Institutes, leave students with mountains of debt and without a degree. Yet, the Department’s proposed rule would eliminate automatic and group debt discharges and relief for those students whose schools close, as long as the schools provided an alternative “transfer option” for students. That the proposed rule would do away with the 2016 borrower defense rule’s automatic discharge for federal loans in these cases, simply because a school recommends a transfer, does nothing to address the larger issue of student debt that is incurred because schools are operating fraudulently.

As it stands, the Department’s proposed borrower defense rule does not protect students or taxpayers. Furthermore, there are no reasonable grounds for the Department of Education to rewrite the existing 2016 borrower defense rule. We urge the Department to retain and implement the stronger 2016 rule, which was developed through a lengthy rulemaking process in which expert stakeholders, including consumer advocates, educators and industry leaders, operated in the best interests of students, taxpayers and the higher education industry.

Thank you for the opportunity to comment.

 

If you were an Art Institute student and your campus recently closed, click here for more information regarding your options going forward.

Consumer Action published a Job Training guide that helps students navigate the process of finding, and paying for, a trustworthy job training program. It's available on our website for free in five languages.

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