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STATEMENT: Maggie Thompson on Final Borrower Defense Regulations

FOR IMMEDIATE RELEASE

October 28, 2016

CONTACT: Kyle Epstein, 202-481-8137

kepstein@americanprogress.org

Maggie Thompson, Executive Director of Generation Progress, issued the following statement after the Department of Education today released its final regulations on protecting students and taxpayers from predatory institutions, and ensuring a process of loan forgiveness in cases of institutional misconduct.

“This rule is an essential step forward for students who were defrauded by their schools. Students deceived by predatory schools will never get the time they spent at the institution back, but this rule gives them a path to be made at least partially whole by establishing a process for loan discharges.

The rule also takes important steps to protect taxpayers from fraudulent institutions. We applaud the Department for taking steps to ensure that schools, not taxpayers, will be on the hook to pay for loan discharges if they defraud students.

The rule includes excellent new protections for students and taxpayers, but does not guarantee them. There is more to be done to safeguard students from predatory institutions.  The rule does not provide a process for automatic group discharge of loans in cases of widespread fraud. The borrower defense program established in this rule grant the both the Secretary and the Department too much discretion in determining who gets relief, and how much. The Department must use this discretion to ensure students get the maximal amount of relief.

Only a small portion of students at Corinthian Colleges, where it has been found that fraud was widespread, have received a loan discharge.  While the Department has made progress in reaching out to borrowers to let them know about loan forgiveness, the example of Corinthian underscores the need for a process that does not put the burden on defrauded student to apply for relief.

The rule contained several other important provisions. We are glad to see the Department take strong action to ban any pre-dispute arbitration agreements by schools. The Department also took a forceful stand to reinstate Pell eligibility to students that attended a school which closed three or more years ago.”

For more information or to speak with an expert, contact Kyle Epstein at kepstein@americanprogress.org or 202.481.8137

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