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Regulating the forgiveness of federal student loans

Tobin Low Sep 10, 2015

Ever since the U.S. Department of Education announced it would forgive the loans of thousands of students who attended Corinthian Colleges, there have been a lot of questions about when students do and don’t qualify for debt relief.

The Education Department made first steps toward regulating student loan forgiveness on WednesdayPolitico reportsHearings in Washington, D.C., and San Francisco will open up the discussion on regulating who should benefit.

The “borrower defense to repayment” rule grants debt relief if students can show under state law that they were defrauded by their collegeIt used to be a rarely invoked section of the Higher Education Act, but the number of students now using it has overwhelmed the Education Department, Politico says.

 

The latest effort won’t affect the separate relief for the thousands of former Corinthian Colleges students who have sought more immediate help with their loans in the wake of their campus closing or being sold.

Pauline Abernathy, vice president at the Institute for College Access & Success spoke with Marketplace when news broke about Corinthian Colleges. When asked about sussing out returns to students, she argued for a more automated process to save time and effort, especially in cases where the government knows which students have been the victims of fraud: “[The application] creates more work for the government and for the borrower when the government already knows that they are eligible for a discharge.”

 

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