Department of Education to Expand Options for Students Defrauded by Colleges

• Newly proposed regulations would widen the criteria for a borrower defense claim.
• The Department of Education and negotiators could not reach consensus on the language, however.
• The representative for for-profit colleges was against the proposals.

Day after day, Department of Education representatives and higher education stakeholders listened to harrowing tales from students who felt defrauded by their former schools.

Many of their three-minute stories had similar themes: difficulty breaking into the field they went to school for (despite assurances from their school that wouldn't be the case), a mountain of student loan debt (more than what their school told them would be required), and a borrower defense process that left them unclear as to whether they'd ever gain relief from that debt.

The students shared their stories during the public comment section of the education department's (ED) negotiated rulemaking session in early December. So when it came time to talk about the issue of borrower defense, the stage was appropriately set for negotiators.

What emerged was a new borrower defense system that would make it easier for former students who believed their former institutions defrauded them to seek and receive debt forgiveness.

Negotiators did not reach full consensus on the rule changes that ED proposed, but with only one holdout, the department is on pace to make these sweeping changes and erase many of the regulations enacted during the Trump administration.

This really goes a long way to ensure a pathway to relief when [students] are victimized by a predatory institution

Most notably, ED's proposed changes would make it so that former students no longer need to prove that they relied upon misleading information from their school when making enrollment-related financial decisions. Borrowers would also no longer need to prove that their former school intentionally misled them, only that they were financially harmed during the enrollment process.

Additionally, the department plans to add "aggressive recruitment" as a category that can now lead to a successful borrower defense claim.

Most negotiators lauded ED's proposed language.

"This really goes a long way to ensure a pathway to relief when [students] are victimized by a predatory institution," said Joshua Rovenger during the rulemaking session. Rovenger represents legal assistance organizations that work on behalf of borrowers.

The representative for for-profit institutions was the only holdout that did not vote in favor of the proposed changes.

Historically, the overwhelming majority of borrower defense claims are filed against for-profit colleges. According to a 2017 analysis from the Century Foundation of over 98,000 borrower defense claims, nearly 99% of claims were made against for-profit schools. Therefore, these institutions have the most to lose since ED may force schools to pay the department back for any student debt it resolves through a successful claim.

According to a 2017 analysis from the Century Foundation of over 98,000 borrower defense claims, nearly 99% of claims were made against for-profit schools

ED's proposal also addresses schools' aggressive recruitment tactics and students' ability to file group borrower defense claims.

Aggressive Recruitment Definition

Currently, students cannot file a borrower defense claim on the grounds that they were aggressively and/or deceptively recruited to a school.

ED is looking to change that.

The department included a list of examples that would qualify as aggressive and deceptive recruitment. They include:

• Demanding or pressuring a recruit to make decisions immediately
• Falsely claiming enrollment spots are limited
• Taking advantage of a lack of understanding of postsecondary education to pressure a student into borrowing
• Discouraging students from consulting with outside parties
• Denying a request for more information related to a program
• Obtaining a recruit's information through false pretenses
• Falsely presenting someone employed by the college as an independent party
• Using threatening or abusive language
• Ignoring a student's request not to be contacted further
• Using emotionally manipulative language

Ability to File Group Claims

Students would also be able to file group borrower defense claims under this new regulatory language. Under the proposed changes, ED would be able to group claims against the same institution together or accept group claims from third-party groups representing borrowers.

Group claimants would also gain access to a few benefits not awarded to individual claimants, according to the proposal. Most notably, a third party can ask that ED evaluate a group claim based on the state law in place wherever the third party organization is based.

Joe Sanders, representing state attorneys general, said this means students may have an easier time getting loan relief if their claim is filed from a state with strong consumer protection laws.

"Many [state laws] go far beyond what's captured here," he said during the rulemaking session. "This helps bring unfairness claims against schools that aren't captured in federal standards."

Jessica Berry, representing for-profit institutions, took issue with this part of the regulation. She said during the session that it contradicts what was put in place by the last administration and is contrary to the goal of trying to create a federal standard.

It does not appear that the department will back down from including the state standard. Jennifer Hong, director of policy coordination and lead negotiator for ED, said ED included this language at the recommendation of negotiators for legal assistance organizations representing borrowers.

Because negotiators did not reach consensus on the proposed borrower defense claim policy changes, ED will ultimately get last say in the final language, which is expected to be revealed early next year.