Advocates for student loan borrowers breathed a sigh of relief on March 30, when the deadline passed for Congress to introduce a resolution to roll back the new “borrower defense” rules. These rules are designed to protect students and taxpayers from harm by predatory schools. After rumblings from Washington that these rules would be in Congressional crosshairs, NCLC and many student loan borrowers and organizations representing veterans, students, borrowers, and others, as well as twenty state attorneys general, let Congress know how important these rules are. It looks like all of our voices were heard: Congress did not introduce a resolution to repeal the rules by the deadline, so these important student protections live another day.
We described the borrower defense rules in detail when they were finalized last fall and in a recent issue brief. The rules help protect student loan borrowers and taxpayers by:
- Creating a long-overdue process for federal student loan borrowers to apply for loan forgiveness they are entitled to seek under the Higher Education Act;
- Restricting schools that participate in the federal student loan program from using abusive arbitration clauses (also known as “rip-off clauses”) and class action bans to silence students’ complaints, force students to “go it alone” with any claims they have against their school, and keep students’ fraud claims against schools out of court;
- Ensuring that students whose schools closed before they could complete their program get relief by automatically forgiving their federal student loans if they do not go back to school within three years; and
- Protecting students and taxpayers by requiring the riskiest schools to warn students and to put money aside to cover the cost if their students’ loans are forgiven.
Most parts of the borrower defense rules are scheduled to go into effect on July 1, 2017. (Some parts of the rules, including automatic loan forgiveness for students whose schools closed on them and who did not go to another school within three years, may go into effect sooner). But defrauded borrowers do not have to wait until July to seek relief: the Department has already created an application form and process for borrowers to request cancellation of their loans based on their schools’ misconduct. Given how much work has already been done to set up this process and the importance of these rules, there is no good reason to delay implementation. Defrauded borrowers have already waited too long for relief.
NCLC will also be watching closely to see how the Department of Education implements these rules. As we previously noted, the rules give the Department authority to better protect students and taxpayers against school fraud and to provide relief to defrauded student loan borrowers. But they also give the Department some discretion in deciding when and whether to use that authority. For the rules to truly serve borrowers, the Department will need to seize on its authority and act to protect and provide relief to student loan borrowers swiftly when schools close or engage in misconduct. Borrowers and their advocates can’t sit back now: we must continue to remind our government that the federal student loan program exists to support students’ opportunities for a better future, not to enable school fraud.
