COMMENTARY: DeVos Hands For-Profit Colleges $11.1 Billion Over 10 Years

By  Charlene Crowell, NNPA Newswire Contributor 

Most consumers would  likely  agree that  consumers should get what  they pay for. If a product or service fails to  deliver  its promises, refunds are in order.  

That kind of thinking guided the Obama Administration’s  decision  to address false  promises made to student loan borrowers.  

A rule known as the “borrower defense to repayment,” came  on the heels of  successive for-profit college closures that left thousands of students stranded educationally  and financially. The federal rule provided a way for snookered students and borrowers to apply for and secure loan forgiveness.Its  premise was that  both borrowers and taxpayers were assured thatthe Department of Education was looking out for them.  

But with a new administration and Education Secretary, rules that made sense and brought taxpayers financial fairness have been repealed and replaced with other rules that favor for-profit colleges, loan servicers, and  other business interests.  

Just as many people were about to begin their Labor Day holiday, the federal Department of Education announced it was changing  a keyrule that provided a pathway to federal loan forgiveness. Instead, a new rule puts in place a process that  will be cumbersome, lengthy, and nearly impossible for consumers to successfully  secure relief.  

Commenting on therule  that will now apply to all federal student loans made on or after July 1, 2020, Secretary Betsy DeVos said, “We believe this final rule corrects the wrongs of the 2016 rule through common sense and carefully crafted reforms that hold colleges and universities accountable and treat students and taxpayers fairly.”  

Excuse me Secretary DeVos, the rule was promulgated due to the thousands of wrongs resulting from less than truthful recruitment practices, false advertising, and targeting of vulnerable populations: low-income, first-generation college students who were often people of color, and veterans seeking new skills in a return to civilian life. For-profit colleges  largely remain financially solvent by their  heavy  dependence upon taxpayer-funded student loans.  

For Black America, the effects of predatory student lending at for-profit collegescomes with severe consequences. According to research by the Center for Responsible Lending (CRL): 

  • Only 21% of all for-profit students in four-year programs graduate within six years;  
  • Four years after graduation, Black students with a bachelor’s degree owe almost double the debt their white classmates owe; and  
  • While for-profit college enrollment represents 8.6% of all college students, these schools generate over 34% of all students who default on their loans.  

While  this  new  rule may make sense to Secretary DeVos,  education advocates had an opposite reaction,  quickly and emphatically  detailing  how  the rule change is as negative as it is  costly.  

“After the collapse of Corinthian College and ITT Tech, two of the largest for-profit education companies in the country, the Obama Administration created the Borrower Defense rule to protect students and taxpayers from deceptive practices that  could jeopardize the future of thousands of students and our economy,” saidAshley Harrington,  a CRLSenior Policy Counsel, and a primary negotiator during the Education Department’s negotiated rule-making process.  

With DeVos’ new rule, both the automatic discharge of federal loans that took effect after a school closed andanother provision that  allowed  group claim relief are now eliminated. Anyone seeking  redress on student loans  must  also  bear the full burden of documenting their alleged “harm” before a claim can be reviewed.  

The new rule also removes states from opportunities to defend their own constituents. State laws, many enacted before the 2016 Obama-era rule took effect, provided another route to  legal redress. But with the new DeVos rule, no state-level claims can be pursued.  

“That’s problematic for us,” added Harrington. “The federal standard should be the floor, not the ceiling, for relief.”   

Over the next decade, the Education Department projects an $11 billion cost-savings from denying loan forgiveness. But for student loan borrowers, denying $11 billion in loan forgiveness adds an unwieldy and costly burden for an education, and earnings that were neverrealized.  

“The new ‘borrower defense rule’ does anything but defend students,” saidJames Kvaal, president of The Institute for College Access & Success (TICAS). “Infactit makes it almost impossible for students who are lied to, defrauded, or otherwise abused by their colleges to get a fresh start. …By leaving students on the hook for colleges’ illegal actions, today’s rule sends a clear message that there will be little or no consequences for returning to the misrepresentations and deceptions that characterized the for-profit college boom.”  

A similar reaction came from Abby Shafroth, an attorney with the National Consumer Law Center, and like Harrington, participated in the Department’s rulemaking meetings.  

“There are over 170,000 pending applications with many borrowers held in limbo for years,” continued Shafroth. “The new rules reflect an ongoing shift to protect the multi-billion-dollar for-profit education industry at the expense of students and taxpayers and come amid concerns about conflicts of interest raised about the rule of former for-profit executives hired by the Department.”  

Rather than saving taxpayer dollars, it seems that this new rule is guaranteeing  a taxpayer-funded  revenue stream for the benefit of for-profit collegesnot students.  

Charlene Crowell is the Center for Responsible Lending’s Communications Deputy Director. She can be reached atCharlene.crowell@responsiblelending.org.  

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