U.S. Department of Education Takes Action to Protect Student Borrowers, Hold Higher Education Institutions Accountable for Deceptive Practices
WASHINGTON—The U.S.
Department of Education today proposed a new package of higher education
regulations aimed at protecting student borrowers, holding higher education
institutions accountable for misrepresentation and fraud and providing
financial protections to taxpayers by at-risk institutions. The
Institutional Accountability regulations, which were published on the
Department’s website today, come after months of public hearings and negotiated
rulemaking that engaged a wide variety of higher education stakeholders.
“Our commitment and
our focus has been and remains on protecting students from fraud,” said U.S.
Secretary of Education Betsy DeVos. “The regulations proposed today accomplish that
by laying out clear rules of the road for higher education institutions to
follow and holding institutions, rather than hardworking taxpayers, accountable
for making whole those students who were harmed by an institution’s deceptive
practices.”
The proposed Institutional
Accountability regulations include provisions that would:
- Put
into place a borrower defense to repayment adjudication process that is
clear, consistent and fair to borrowers who were harmed by institutional
misconduct
- Replace
the current “state standard” for adjudicating claims with a Federal
standard that clearly defines misrepresentation and enables more
expeditious review of student claims
- Facilitate
collection and review of evidence for deciding claims and ensure that the
Secretary of Education can recoup from institutions the financial losses
associated with successful borrower defense claims
- Encourage
students to seek remedies directly from institutions that have committed
acts of misrepresentation
- Expand
from 120 days to 180 days the period of time during which students who
left an institution prior to its closure are eligible for a closed school
loan discharge while at the same time incentivize closing institutions to
engage in orderly teach-outs, which enable more students to complete their
program
- Ensure
that institutions requiring students to engage in mandatory arbitration or
prohibiting them from participating in class action lawsuits provide plain
language explanations of these provisions to enable students to make an
informed enrollment decision
- Prevent
guaranty agencies from charging borrowers a fee if a defaulted loan goes
into repayment within 60 days
- Protect
taxpayers by requiring institutions to post a letter of credit when events
occur that put the institution’s continuing operations or financial
stability at risk
The proposed regulations
will be open for public comment over the next 30 days. In addition to
seeking public comment on all provisions of the proposed regulation, the
Department has included a directed question asking for public comment on two
different approaches to accepting borrower defense to repayment claims, which
include:
- Accepting
“defensive” claims only, which limit borrower defense claims to defaulted
borrowers who are in a collections proceeding; or
- Accepting
both “defensive” and “affirmative” claims, including from borrowers still
in repayment
Because the implications of
this determination are far-reaching for taxpayers and borrowers, the Department
is seeking comment on how to balance the need to protect borrowers from acts of
institutional fraud with the need to protect taxpayers from the high cost of
unjustified claims.
To view the proposed
regulations package in its entirety click here.
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