Today, the U.S. Department of Education announced final regulations amending the Borrower Defense to Repayment provision of the Higher Education Act (HEA) to ensure that students and taxpayers do not have to bear the financial burdens that arise when predatory higher learning institutions make misrepresentations and fail to provide students with an adequate education. These kinds of bad practices severely limit students’ professional outcomes and ability to repay their loans. The Center for Responsible Lending (CRL) is particularly concerned about the impact of these practices on borrowers of color, who are disproportionately defrauded by these institutions.
Center for Responsible Lending (CRL) Counsel Ashley Harrington released the following statement:
The Department’s efforts mark significant steps in curbing practices that prevent students from seeking relief by banning pre-dispute arbitration clauses and the prohibition of class actions. The rule prohibits “gag” rules that require students to exhaust internal processes before pursuing external relief. The rule now provides increased access to relief for students who have attended closed schools, including automatic discharges for those students who don’t return to school within 3 years. The Department has also indicated that it will swiftly provide relief for students who attended schools that closed on or after November 1, 2013, including the thousands of students who attended Corinthian Colleges. These actions, coupled with the Department’s announcement that it will restore Pell Grant eligibility for borrowers at closed schools, are an important step in ensuring that defrauded students have the opportunity to continue their education at other institutions.
While the Center for Responsible Lending applauds the Department for making significant improvements to the regulations, we still have concerns that the rule falls short in several ways. While the regulations do provide more guidance on how the Department will determine the amount of relief for each borrower and places the burden on the school for proving that any value was obtained from the education, the final regulations do not include a presumption of full relief for borrowers at the outset of a claim.
We are also concerned that the Department declined to make the Federal standard a floor and not a ceiling for relief and will not consider claims based on state law for loans (unless it is in the form of a contested judgment) dispersed after July 1, 2017. The rules also do not allow for formal third-party advocacy on behalf of students through state Attorneys General or legal aid organizations.
Because of these concerns, it is unclear how effective this rule will be in ensuring that borrowers get relief and that bad actors are further rooted out. Many provisions afford the Secretary significant discretion and provide no clarity as to how these decisions will be made. We look forward to the issuance of procedural guidelines that we hope will provide further guidance on how this rule will be implemented.
For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Ricardo Quinto at ricardo.quinto@responsiblelending.org.