How do you prove intent by an institution to defraud student loan borrowers? With great difficulty, if at all, according to education advocates, but that is the standard the U.S. Department of Education is proposing for borrowers seeking relief from federal student loan debt due to deceptive practices by colleges.
The proposal, which is subject to public comment for 30 days, would establish a new federal standard for the so-called borrower defense to repayment regulation, allowing debt relief only if an institution knowingly provided false, misleading or deceptive loan information to a student borrower or provided the information with “reckless disregard for the truth.”
The proposal would also allow schools to require students to enter into pre-dispute arbitration agreements or class action waivers as a condition of enrollment so long as they disclosed those requirements in an “easily accessible format” along with information on how to use “the internal dispute resolution process.”
The Education Department says the proposal will “enable students to make informed decisions prior to college enrollment, rather than to rely on financial remedies after the fact,” and to settle disputes more quickly, but many disagree.
“These changes would effectively strip students of their right to recourse if they believe that a college or university has misled them, making it next to impossible for defrauded students to get the relief they are entitled to,” says Robert Shireman, a senior fellow at The Century Foundation.
“By requiring borrowers to prove that school officials intended to deceive them — which essentially requires mind-reading skills — the proposal makes it almost impossible for defrauded borrowers to get relief.”
James Kvaal, president of The Institute for College Access & Success, said the proposal would require “desperate borrowers to intentionally default — with all its negative consequences — before even seeking relief, forcing them to gamble on an unsympathetic bureaucracy.”