Education Department to Grant Partial Discharge of Loans

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By Emily Wilkins

Students attempting to have their federal education loans discharged after being significantly misled by a college might only be able to receive partial relief, according to senior Education Department officials.

The changes announced Dec. 21 currently apply only to students who attended for-profit Corinthian College, but will eventually be used for any student filing a claim.

Under the new system, students claims for loan discharge would be measured by how much an average graduate of their program earned compared with what an average graduate in similar programs at other schools earned. If the average graduate’s earnings were 50 percent less than the earnings of their peers in similar programs elsewhere, the student’s loan would be fully discharged. If the average earnings were more than 50 percent, the student would get partial discharge based on a tiered system in which they could get as much as 50 percent or as little as 10 percent of their loan forgiven.

Department officials said the change is meant to ensure fairness by taking into account any value the students gained from attending the school, and to taxpayers who are expected to ultimately foot the bill for discharged loans. Officials stressed that the change in procedure was legal as the department’s secretary has always had the ability to grant partial relief.

“We have been working to get this right for students since day one,” said Secretary Betsy DeVos. “No fraud is acceptable, and students deserve relief if the school they attended acted dishonestly. This improved process will allow claims to be adjudicated quickly and harmed students to be treated fairly. It also protects taxpayers from being forced to shoulder massive costs that may be unjustified.”

The department said there are currently more than 100,000 claims from students at various colleges seeking loan forgiveness. Of those, 12,900 Corinthian-related claims have been approved and are ready to be discharged in the next several months, some of which would partially forgive the loans. Another 8,600 Corinthian claims to be discharged have been denied, a decision that was made based on the same criteria as used during the Obama administration, department officials said.

The claims will include some that were filed after the Trump administration took office. So far, the department has only processed claims that were approved during the Obama administration.

Awarding partial relief was considered under the Obama administration, but those at the department were hesitant to create a formula as numerous factors should go into determining whether a student is eligible for a loan discharge, said Clare McCann, who worked at the department under the Obama administration as a senior policy adviser.

“Looking at the program and the school and circumstances—the lies that were told, and the harm that was done, and to the degree it was widespread within the school—all those things taken together would give you a sense of what amount of relief is appropriate,” she said. “It’s a little silly to pretend you can be extremely precise in these circumstances.”

Democrats in the House and Senate opposed granting students a partial discharge in a November letter to the Education Department. After the announcement was made. Rep. Robert Scott, (D-Va.) the ranking member of the House Education Committee said it was not fair that Corinthian students whose claims were processed after January 2017 faced a formula for partial discharge after their peers had received full forgiveness.

“It is nonsensical for defrauded students who earn 49 percent of what they should be earning to receive full relief from their loan debt, while students earning just one percentage point more are relieved of only half of the debt,” Scott said. “No student should be forced to repay any of the loans incurred to attend an institution found to have provided a worthless education.”

To contact the reporter on this story: Emily Wilkins in Washington at ewilkins@bgov.com

To contact the editor responsible for this story: Paul Hendrie at phendrie@bgov.com

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