Congress could undo Obama-era student
loan relief
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[November 18, 2016]
By Lisa Lambert
WASHINGTON (Reuters) - The U.S. Congress
could as soon as January start to dismantle President Barack Obama's
transformation of student loan rules by blocking freshly minted
regulations designed to help students who say they were defrauded by
for-profit colleges.
The new measures, which lay out loan relief procedures for the students,
were issued by the Department of Education just days before the
election. That is recent enough to allow the new Republican-led Congress
to disapprove them under a 1996 law called the Congressional Review Act.
It gives Congress 60 legislative days to reverse regulations with a
simple vote.
Republicans opposed the rule when it was proposed. Lamar Alexander, who
chairs the Senate committee on education, is considering introducing a
resolution that would overturn the so-called "Borrower Defense" rule,
according to a spokeswoman.
Even without a legislative reversal, president-elect Donald Trump, who
ran on an anti-regulation platform and started his own for-profit
school, could instruct agencies to be more restrictive in how they
interpret this rule and others aimed at easing student loan burdens.
Students who attended the now-defunct Trump University did not qualify
for federal loans and are not eligible for loan relief. Trump is facing
civil lawsuits alleging fraud related to the school.
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After he was elected president, the stocks of for-profit education
companies rose.
The borrower defense rule was inspired by the meltdown of Corinthian
Colleges Inc. in 2015, according to Rohit Chopra, who worked on the
Corinthian case at the Consumer Financial Protection Bureau and later
moved to the Department of Education as a special adviser. In recent
months, ITT Tech. Inc. has also folded, leaving students adrift.
By law, students at struggling technical and professional colleges are
already allowed relief on federal loans, but the new rule creates a path
for getting that relief. Students can make a fraud claim to the
Education Department and then apply for a refund of federal money they
borrowed and then paid to the school.
It is the payment on a fraud complaint - sometimes made in the absence
of any actual conviction - that rankles Republicans. They also dislike
that the rule leaves students free to file class action suits against
the schools, instead of arbitrating all disputes, said Neal McCluskey,
who follows higher education at the Cato Institute, a libertarian think
tank.
It is not clear how many students - or how much in loans - would be
affected by the new rule. The Education Department says it has already
approved $250 million in relief to more than 15,000 applications from
students who borrowed to attend Corinthian.
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![](../images/111816pics/news_J15.jpg)
Senator Lamar Alexander (R-TN) smiles as he addresses the Reuters
Washington Summit in the Reuters newsroom in Washington, November 9,
2011. REUTERS/Jonathan Ernst
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The projected 10-year federal government expenses associated with
the rules total $16 billion.
AN UP OR DOWN VOTE
Congressional disapproval resolutions have failed in the past,
because Obama vetoed them. But in 2017, anti-regulation Republicans
will control the House, the Senate and the White House, and it takes
only a simple majority of both chambers to reverse a rule.
Education Secretary John King defends the rule, saying his
department went through a very thorough rule-making process and
addressed thousands of comments in the final version of the
regulations.
"The fact remains that students need some sort of process for
student loan discharge in the case of a school closure or fraud,"
said Justin Draeger, president of the National Association of
Student Financial Aid Administrators. "I'm not sure it's as easy as
simply voiding the entire regulation."
There are other higher education reforms a Trump administration
might undo, said Elizabeth Baylor, director for post-secondary
education at left-leaning Center for American Progress.
Many borrower programs instituted under Obama are at the education
secretary's discretion, and Trump could appoint someone stricter on
granting relief. A new secretary could also simply discontinue
programs, she said.
In the same vein, Steve Gunderson, president of Career Education
Colleges and Universities, says Congress could block the new rule
without a resolution, either through an upcoming budget bill or
education legislation.
(Reporting by Lisa Lambert; Editing by Linda Stern and Dan Grebler)
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