New U.S. Congress Could Strip Students of Federal Loan Relief

College students in classroom

U.S. Congress could undo Obama administration loan relief measures for students who had been defrauded by for-profit institutions as soon as January. The Department of Education passed the “Borrower Defense” package days before the Election Day.

But the Republican-controlled Congress may disagree with some of these measures. Republicans claim that a 1996 law enables them to reverse any legislative action within 2 months with a simple vote.

Republicans Poised to Reverse the Law

GOP leadership opposed the measures when they first heard about them. The chair of the Senate committee on education promised to draft a bill that would dismantle the new measures.

In addition, president-elect Donald Trump who touts anti-regulation views and owns a for-profit education company – the Trump university – could also want to undo the changes. Trump is in the hot seat because students did not qualify for federal loans. And several students and parents sued him for fraud. Yet, shortly after his win, stocks of for-profit schools jumped.

The borrower defense legislation stems from an older scandal which involved the Corinthian Colleges, a person who helped with drafting the rules said. Recently, ITT Tech. Inc has also collapsed leaving students in limbo.

Federal laws already allow students of these colleges to receive relief on federal loans. But the latest regulation provides them with a shortcut. Under Borrower Defense, students can file a fraud complaint with the Education Department. Next, they can ask for a refund of the money they borrowed to pay for their education.

But Republicans do not want federal money to end up in the pockets of defrauded students in the absence of a conviction. GOP leaders are also upset that students may get involved class action suits against the colleges instead of settling the matter by arbitration.

As of now, it is unclear how much money in loans the new rule will cover. Education officials say that they gave $250 million in relief to students from Corinthian alone. There were about 15,000 applicants for loan forgiveness. Analysts estimate the entire operation would cost the federal government $16 billion over the next ten years.

Undoing the Rules is Very Likely

Other attempts to dismantle Obama administration measures failed in the past because Obama vetoed them. But now with a Republican-led legislature and a Republican in the Oval Office Democrats could see more of their laws reversed. Education Secretary John King commented on the possibility. He explained that the department carefully drafted the rules and drew inspiration from thousands of comments.

The National Association of Student Financial Aid Administrators agrees that students who are left behind after a school closure or fraud need the loan discharge. The group doesn’t think reversing the entire legislation is a good idea.

In addition, a Trump administration could reverse other education reforms Republicans are not happy about. For instance, Republicans could appoint an official less likely to grant relief under Obama’s borrower programs. At the moment, the education secretary supervises the programs. Experts say Congress could undo the rules through an education bill or the incoming budget bill.

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