Congress could undo Obama-era student loan relief

Education Management

17/11/2016 20:26

By Lisa Lambert 
    WASHINGTON, Nov 17 (Reuters) - The U.S. Congress could as 
soon as January start to dismantle President Barack Obama's 
transformation of student loan rules by blocking freshly minted 
regulations designed to help students who say they were 
defrauded by for-profit colleges. 
    The new measures, which lay out loan relief procedures for 
the students, were issued by the Department of Education just 
days before the election. That is recent enough to allow the new 
Republican-led Congress to disapprove them under a 1996 law 
called the Congressional Review Act. It gives Congress 60 
legislative days to reverse regulations with a simple vote. 
    Republicans opposed the rule when it was proposed. Lamar 
Alexander, who chairs the Senate committee on education, is 
considering introducing a resolution that would overturn the 
so-called "Borrower Defense" rule, according to a spokeswoman.  
    Even without a legislative reversal, president-elect Donald 
Trump, who ran on an anti-regulation platform and started his 
own for-profit school, could instruct agencies to be more 
restrictive in how they interpret this rule and others aimed at 
easing student loan burdens. 
    Students who attended the now-defunct Trump University did 
not qualify for federal loans and are not eligible for loan 
relief. Trump is facing civil lawsuits alleging fraud related to 
the school.  urn:newsml:reuters.com:*:nL1N1DE0D8 
    After he was elected president, the stocks of for-profit 
education companies rose. urn:newsml:reuters.com:*:nL1N1DE0GC 
    The borrower defense rule was inspired by the meltdown of 
Corinthian Colleges Inc. in 2015, according to Rohit Chopra, who 
worked on the Corinthian case at the Consumer Financial 
Protection Bureau and later moved to the Department of Education 
as a special adviser. In recent months, ITT Tech. Inc. has also 
folded, leaving students adrift.  urn:newsml:reuters.com:*:nL2N1BT02R 
    By law, students at struggling technical and professional 
colleges are already allowed relief on federal loans, but the 
new rule creates a path for getting that relief. Students can 
make a fraud claim to the Education Department and then apply 
for a refund of federal money they borrowed and then paid to the 
school. 
    It is the payment on a fraud complaint - sometimes made in 
the absence of any actual conviction - that rankles Republicans. 
They also dislike that the rule leaves students free to file 
class action suits against the schools, instead of arbitrating 
all disputes, said Neal McCluskey, who follows higher education 
at the Cato Institute, a libertarian think tank.  
    It is not clear how many students - or how much in loans - 
would be affected by the new rule. The Education Department says 
it has already approved $250 million in relief to more than 
15,000 applications from students who borrowed to attend 
Corinthian. 
    The projected 10-year federal government expenses associated 
with the rules total $16 billion.  
 
    AN UP OR DOWN VOTE 
    Congressional disapproval resolutions have failed in the 
past, because Obama vetoed them. But in 2017, anti-regulation 
Republicans will control the House, the Senate and the White 
House, and it takes only a simple majority of both chambers to 
reverse a rule.  
    Education Secretary John King defends the rule, saying his 
department went through a very thorough rule-making process and 
addressed thousands of comments in the final version of the 
regulations. 
    "The fact remains that students need some sort of process 
for student loan discharge in the case of a school closure or 
fraud," said Justin Draeger, president of the National 
Association of Student Financial Aid Administrators. "I'm not 
sure it's as easy as simply voiding the entire regulation." 
    There are other higher education reforms a Trump 
administration might undo, said Elizabeth Baylor, director for 
post-secondary education at left-leaning Center for American 
Progress. 
    Many borrower programs instituted under Obama are at the 
education secretary's discretion, and Trump could appoint 
someone stricter on granting relief. A new secretary could also 
simply discontinue programs, she said.  
    In the same vein, Steve Gunderson, president of Career 
Education Colleges and Universities, says Congress could block 
the new rule without a resolution, either through an upcoming 
budget bill or education legislation. 
     
 
 (Reporting by Lisa Lambert; Editing by Linda Stern and Dan 
Grebler) 
 ((lisa.lambert@thomsonreuters.com; +1 202 898 8328; Reuters 
Messaging:  lisa.lambert.thomsonreuters.com@reuters.net)) 
 
Keywords: USA TRUMP/STUDENTLOANS