The Department of Education Announces Details of New Borrower Defense Rule
Almost two years ago, Corinthian students started submitting applications for debt cancellation based on the Defense to Repayment law. Since then, thousands of students from for-profit colleges across the country have joined the fight for debt relief.
Today, the Department of Education released new rules for how it will grant discharges. Here are the most important items from today's announcement:
1) The Department announced additional discharges for 12,000 students who attended Corinthian.
Make no mistake, the only reason these discharges are happening at all is because students got organized and declared a debt strike. Still, only 15,000 borrowers in total have received debt relief so far. This is only about 2% of those who were scammed. It's not even close to good enough. When the Department finds systematic wrongdoing, it has the power to cancel debt automatically on a group-wide basis. It has found systematic wrongdoing at Corinthian. Yet it still insists on individual applications from borrowers subjected to this wrongdoing. Why?
2) The Department announced a new process for determining when students will get their debts cancelled after their school defrauded them. Individual applications will still be required in almost every case, and the decision about who deserves relief is still up to the government.
The fact that the individualized process continues is confusing given that today's announcement also includes a statement from the Department that it will begin to grant closed school discharges without individualized applications. If the Department doesn't need applications to cancel loans, then why is it requiring them in the vast majority of cases?
3) The Department is still denying any relief for borrowers who attended before 2010 and does nothing for those Corinthian borrowers with FFEL loans who have not been placed into forbearance.
The Department wants to be congratulated for finally announcing a process where people can get relief. But nowhere does it mention that at least 80,000 Corinthian students remain in collections despite being eligible for discharges. Nor do they mention ITT Tech's closure or the fact that 800 former ITT students are now on strike.
More Details on the New Regulations
The new process allows for automatic group-wide discharges for debtors with Direct Loans. The twist is that only the Department of Education can determine when this process will happen and nothing in today's announcement clarifies what they will consider in making that decision. There are plenty of reasons not to trust the Department, so we have reason to be skeptical about what this new process will look like in practice.
Debtors with FFEL loans will have to consolidate into Direct Loans in order to get any relief at all. In other words, there will be no automatic, group-wide discharges of FFEL loans. The good news is that FFEL loan holders will finally be placed into forbearance pending review of DTR applications.
There is one piece of excellent news in today's announcement. The new regulations ban arbitration agreements, including (as far as we can tell) retroactively. That means that, starting in July 2017, we can finally join together and sue the hell out of the Department of Education.
Let's keep organizing to win relief to all defrauded borrowers. We're just getting started.