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UPDATE 1-U.S. education head seeks rule redo for defrauded college students
June 14, 2017 / 5:45 PM / 3 months ago

UPDATE 1-U.S. education head seeks rule redo for defrauded college students

(Adds education secretary DeVos quotes, details on regulation)

By Lisa Lambert

WASHINGTON, June 14 (Reuters) - U.S. Education Secretary Betsy DeVos on Wednesday called for a “regulatory reset,” and pressed pause on a rule intended to speedily cancel the student-loan debts of people defrauded by for-profit Corinthian Colleges Inc and others, so that it can be rewritten.

DeVos said the department is still granting debt relief that the students are entitled to by law as expeditiously as possible, and some borrowers should expect to obtain discharges within the next several weeks. The Education Department is processing 16,000 claims for relief.

DeVos, a Republican and advocate of public-private partnerships in education, said she was delaying the effective date of the rule on accelerating the process, which was enacted at the end of last year under the administration of former President Barack Obama, a Democrat.

“Unfortunately, last year’s rulemaking effort missed an opportunity to get it right,” DeVos said in a statement. “The result is a muddled process that’s unfair to students and schools, and puts taxpayers on the hook for significant costs. It’s time for a regulatory reset.”

Obama overhauled federal student lending, moving it from the banks to the Education Department and also trying to prevent students from taking out loans they could not repay after graduation. He specifically targeted for-profit, career colleges that promise students they will find jobs post-graduation and can charge high tuition.

The reforms became a hot-button issue in last year’s presidential campaign, with Democrats seeking to preserve them and Republicans such as then-candidate President Donald Trump saying the U.S. government should “get out of the business” of lending.

In recent weeks states and Democratic lawmakers have pressed DeVos on the “borrower defense” rule, saying thousands of student have been caught in limbo as the Education Department slowly grants discharges.

They have especially been concerned about growing backlogs of relief applications and of loans approved for discharge that simply need a sign-off. They say the delays force students to keep up unaffordable monthly payments or face debt collection.

Amid federal and state investigations in 2015 into its post-graduation rates, Corinthian filed for bankruptcy and abruptly closed its 28 schools. Many students were caught with student loans they had taken out to pay for Corinthian tuition.

DeVos said she would also seek to redo a “gainful employment” rule that was intended to help students avoid enrolling in and taking out student loans for career colleges that consistently fail to deliver on promises of job security and high salaries for graduates. (Reporting by Lisa Lambert; Editing by Grant McCool)

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