Education Dept. Considers Tougher Rules On Loan Forgiveness In Fraud Cases

Updated at 5:15 p.m. ET

Trying to change Obama-era rules, the Trump administration is one step closer to making it more difficult for students to have loan debt wiped clean in cases involving fraud by universities.

The Department of Education has been making incremental moves toward watering down the policies for months, but a draft proposal obtained by Politico, lays out the administration's new vision, which places a higher burden of proof on students seeking to obtain debt forgiveness and requires applicants to individually present evidence that their college's deception was intentional.

The existing program, called Borrower Defense to Repayment, provides relief to federal student loan borrowers who attended a school that misled them or engaged in other misconduct in violation of certain laws.

Education Secretary Betsy DeVos convened a special committee to rewrite the policy in June, saying the regulations are "overly burdensome and confusing" and need to be streamlined.

"It is the Department's aim, and this Administration's commitment, to protect students from predatory practices while also providing clear, fair and balanced rules for colleges and universities to follow," DeVos said in a statement at the time.

According to Politico, the draft proposal says applicants would have to establish "clear and convincing evidence" of their fraud claim. This is a change from the standard set under President Barack Obama, which required only a "preponderance of evidence."

Additionally, the proposal says borrowers must "demonstrate that the college's misrepresentation to them was intentional – or at least reflected 'a reckless disregard for the truth'." Finally, a person seeking to erase a debt must prove that the misrepresentation led to monetary damage.

Among other possible changes is a reduction in the time allotted to file a claim, from six years to three years "of the date the borrower discovered, or reasonably should have discovered, the misrepresentation."

Since the Obama policies were implemented, DeVos has said, many for-profit colleges have complained that definitions of misrepresentation and breach of contract are too broad and that institutions lacked meaningful due process.

The rules were introduced in 2016 in response to several high-profile cases in which for-profit institutions — including Corinthian Colleges, DeVry and ITT Tech — committed widespread fraud by lying about job placement rates and used other deceptive tactics to lure students into enrolling.

A Department of Education official told members of Congress in July that the Trump administration had not approved any applications for student-loan forgiveness and that it had stopped reviews of any new claims since the start of the administration.

Records released to Sen. Richard Durbin, D-Ill., show the department received nearly 15,000 new applications from borrowers who say they were victims of fraud between Jan. 20 and July 5.

A department spokeswoman said the moratorium on reviewing new applications would remain until a new system to adjudicate pending claims had been developed.

The Associated Press reported that in the final year of the Obama administration, the department approved more than 28,000 claims filed by former students of Corinthian Colleges. Those claims totaled $558 million.

In June, NPR reported that attorneys general from 18 states and Washington, D.C., filed suit against DeVos and her department, accusing DeVos of breaking federal law and giving free rein to for-profit colleges by rescinding the borrower defense rule.

The rule had been put on hold less than one month after DeVos said her agency would re-evaluate it.

NPR has requested a copy of the draft proposal.

The potential rules will be discussed next week at a three-day meeting starting Monday of the special committee assembled by DeVos, according to Education Department spokesman Alberto Betancourt. It is the second round of negotiations to establish new guidelines.

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