Student Loan News: Government Stalls on Borrower Defense; Warren Has Plan

Welcome to Student Loan News, a weekly summary of developments and events affecting college debt in the U.S. Join us each Friday for a look at goings-on that could impact your own student loan situation.

Defrauded students waiting for relief

The Education Department is waiting on a legal ruling before tackling the backlog of students who were defrauded by schools and are now seeking student loan relief, Principal Deputy Under Secretary Diane Jones said Tuesday.

According to Politico, there are more than 158,000 claims waiting for a decision. But Jones said “the department, unfortunately, is waiting for a court ruling,” and that while determinations on some cases are clear-cut and could be processed now, “where there are students that are likely eligible for partial relief, we’re stuck.”

Education Secretary Betsy DeVos has sought to overhaul the borrower defense rule, rolled out during the Obama administration to protect students scammed by unscrupulous schools, and for a while, the department had stopped processing claims against for-profit schools accused of defrauding students.

Last October, however, a court ruling said the department would need to comply with borrower defense.

With the administration now stuck with the rule, Jones said the department was working to make major changes to it. As Politico reported, it “now plans to publish a final borrower defense rule based on the Trump administration’s proposal from last fall” as announced by DeVos.

How it affects YOU: Many of the outcomes from the government these days seem to hinge on whether a decision is good politics. If polling — or a (loud) outpouring of support or opposition — shows something is a good or bad idea, politicians will often act accordingly. So if borrower defense affects you or is something you care about, you can call your senators and your representative to sound off, and even get your like-minded friends to do the same.

Military service members to get more protections

Advocates for student loan borrowers in the military scored a big win this week, as the Pentagon announced a plan alert those serving in combat on the option of ceasing interest from accruing on their college debt.

A new data-sharing agreement with the Department of Education will automatically flag all service members who qualify for cancelling their interest costs, Politico reported.

The benefit for those serving in war zones was enacted in 2008, but the report notes that few military members took advantage of it. In fact, as a separate MarketWatch item noted, student loan servicer Navient paid out $60 million to almost 78,000 service members in a

2015 legal settlement with the government over the interest rule.

The announcement comes as the government is considering amending the so-called “90/10” rule that may have led some less-than-honest schools to target veterans for their GI bill funds.

How it affects YOU: If you have views on the proposed data-sharing plan, you have until May 16 to submit your comments to the government. You can do so online or by mail.

Also in the news …

  • Presidential candidate Sen. Elizabeth Warren unveiled a detailed slate of student debt relief programs Monday, including a plan to cancel up to $50,000 in student loans per person for 42 million borrowers. You can read the details here.
  • Meanwhile, rival presidential hopeful Sen. Amy Klobuchar said this week that politicians promising student loan debt relief aren’t being honest about what’s possible, The Week reported.
  • Opponents of student loan forgiveness are pushing back against recent proposals. They include Liz Peek, Rush Limbaugh, and Derek Hunter, who said that “every student with a complaint about student debt” should be asked whether they “understand the concept of a loan.”
  • Student loan servicer Navient has been the focus of various complaints and lawsuits, but it still managed to pleasantly surprise its investors Wednesday by posting better-than-expected earnings for the first quarter, sending its share price higher.
  • An op-ed published Tuesday in Forbes says student loan forgiveness could help shrink the pay gap between women and men.

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