A new rule finalized Friday by the Obama administration will cost student debtors who say their colleges defrauded them some longstanding rights to get their federal loans canceled, while colleges on shaky financial footing dodged a government crackdown.Notwithstanding that the new regulations prevent binding arbitration, this is a classic Obama administration rule: In the face of problems created by bad actors, we see an accommodation of those miscreants, with the rest of us bearing the cost.
Those regulations, proposed in June, mark the administration's response to the spate of closures of for-profit colleges, following state and federal investigations and lawsuits that have so far led more than 80,000 Americans to seek debt relief, alleging fraud, according to new figures the U.S. Department of Education also released Friday.
According to a summary of the rule the agency provided late Thursday1, borrowers who receive federal student loans starting next July and who subsequently accuse their colleges of misleading them into enrolling will face a narrower path to debt relief than today's borrowers.
If the rule is upheld, defrauded student debtors no longer will be able to get their loans canceled by alleging their schools violated state laws, unless they first successfully sue. Instead, they'll be subject to a new federal standard—one officials say is more efficient but consumer advocates say limits borrowers' ability to file claims.
01 November 2016
In response to a spate of for profit college failures and scandals, the Obama Administration has moved to make it harder for defrauded students to get released from their student loans: