Student Loan Forgiveness: New Plans, Income-Based Reduction Efforts, Secret Shoppers, More Laws
Student Loan Forgiveness Rule Quietly Changes - How It Affects Borrowers’ Debt
Yaёl Bizouati-Kennedy
Mon, March 27, 2023 at 7:00 AM GMT+9·
The Biden administration has yet again quietly updated the timeline for borrowers seeking student loan forgiveness under a one-time account adjustment, according to reports.
In April 2022, the Department of Education announced updates that “will bring borrowers closer to forgiveness under income-driven repayment (IDR) plans.” Said updates include a one-time adjustment of IDR payment counters “to address past inaccuracies and permanently fixing IDR payment counting by reforming ED’s IDR tracking procedures going forward,” the department stated.
As the Student Borrower Protection Center (SBPC) indicated, IDR was originally designed to offer borrowers a reduced monthly payment tied to their income, not their outstanding balance.
“In theory, federal law also provides that after a 20 or 25 year IDR repayment term, the borrower’s debt is canceled in full. However, in recent years, investigations by SBPC and the National Consumer Law Center, National Public Radio, and the Government Accountability Office revealed widespread problems with IDR,” the SBPC wrote in a January 2023 post.
Forbes reported that when the Education Department announced the one-time adjustment last April, the guidance indicated that borrowers could start receiving student loan forgiveness by the fall of 2022, and that all others should receive their one-time retroactive credit by January.
Then, in an updated guidance statement delivered October 2022, the department “maintained that borrowers eligible for immediate student loan forgiveness would still receive those benefits under the IDR account adjustment before the winter of 2022,” and that “all other borrowers would not receive retroactive IDR credit until July 2023,” according to Forbes. In a further December 2022 update, the department extended this timeline further, “pushing out expected student loan forgiveness under the adjustment to the spring of 2023, with all others receiving the benefits of the adjustment in the summer of 2023.”
And now, the key dates have been pushed even further, Forbes noted. In the latest guidance document released this week, the Education Department declared it still expects borrowers eligible for immediate student loan forgiveness under the IDR account adjustment to receive those benefits in the spring. But now, “All other borrowers will see their accounts update in 2024,” according to a press release - which, as Forbes noted, could translate to a delay of more than one year.
According to Forbes, the delays are due to Congress not providing additional funding to the Office of Federal Student Aid in a recent budget bill.
https://news.yahoo.com/student-loan-forgiveness-rule-quietly-170841968.html
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Student loans: Secret shoppers used to help sniff out predatory schools
Ronda Lee
March 23, 2023
The Education Department plans to use secret shoppers to determine if schools are engaging in practices that violate rules around federal student aid programs. The Federal Student Aid shoppers will assess recruitment, enrollment, financial aid, and other practices of higher education institutions to help spot potentially misleading or predatory practices, the Education Department said.
The initiative is part of a broader effort by the Biden administration to increase oversight of schools, improve student experiences, and hold low-performing and predatory schools accountable.
“Building the secret shopper program is a good investment that will return dividends towards protecting students and taxpayer dollars,” Kyra Taylor, a staff attorney at National Consumer Law Center, told Yahoo Finance. “But this is just the first step [and] investigation alone is not enough. The Department must take bold steps to shut poorly performing schools down and to provide all borrowers who attended those schools with relief.”
Shoppers will specifically be on the lookout for misrepresentations related to the following:
Transferability of credits
Job placement rates
Completion and withdrawal rates
Graduates’ future earning potential
Career services
Cost of attendance
Amount of federal student aid
Accreditation status
Other practices that could violate regulations that govern participation in the federal student aid programs
If any misrepresentations are found, they can be used as evidence to support the enforcement division of the department or the Office of Inspector General’s investigations. “Secret shopping is another tool in FSA’s toolbox as we expand our oversight work to hold predatory schools accountable,” Richard Cordray, chief operating officer at Federal Student Aid (FSA), said in a press release. “Our focus - as always - is to ensure that students, borrowers, families, and taxpayers are not being preyed upon to make a quick buck.”
Predatory and low-value schools have been a focus of the Biden administration and contribute to the student debt crisis, leading to debt discharges related to the closed school loan discharge and borrower loan defense discharge programs. If a school closes while students are enrolled, federal student loan borrowers can have their loans discharged. If a school made fraudulent misrepresentations that caused a student to enroll, they can use the borrower loan defense to get their federal student loans discharged.
Borrower defense applications surged after the Obama administration cracked down on predatory for-profit colleges in 2015 and created new regulations, like borrowers’ defense and the gainful employment requirement. But the mechanism for defrauded borrowers seeking debt relief broke down during the Trump administration under then Education Secretary Betsy DeVos, with the department systematically denying relief claims in form denials.
Under the Biden administration, the Department has discharged $11.4 billion in student loan debt related to the borrower loan defense discharge for students at ITT Tech, DeVry University, Corinthian College, and Westwood College.
Credits that students earned at ITT weren’t transferable, and many ITT campuses lacked internet and training equipment, according to ED findings. Corinthian College was accused of misrepresentations about finances and job placement rates.
Westwood College made "substantial misrepresentations" about job placement rates, including “misleading guarantees” about getting jobs in their field of study, “assurances of unrealistic post-graduation salaries,” and exaggerations about “the transferability of its credits” when the institution knew those credits “would rarely transfer,” according to ED findings.
In addition to the secret shoppers, last year FSA released two bulletins to protect veterans and service members from schools making misrepresentations on the GI Bill and to set up a tip hotline so consumers can report any potential violations of laws for federal student aid programs.
In 2021, the administration also reinstated the Office of Enforcement within Federal Student Aid in charge of school oversight and accountability efforts.
“Schools that engage in fraud or misconduct are on notice that we may be listening and they should clean up accordingly,” Kristen Donoghue, chief enforcement officer at FSA, said in the press release. “But schools that treat current and prospective students fairly and act lawfully have nothing to fear from secret shopping.”
Ronda is a personal finance senior reporter for Yahoo Finance and attorney with experience in law, insurance, education, and government. Follow her on Twitter @writesronda
https://finance.yahoo.com/news/student-loans-secret-shoppers-used-to-help-sniff-out-predatory-schools-204455821.html
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Student Loan Crackdown: Elizabeth Warren Pushes Sweeping Overhaul of College Debt System - and Even More Forgiveness
Vance Cariaga
Wed, March 29, 2023 at 8:10 PM GMT+9·
U.S. Sen. Elizabeth Warren (D-Mass.), who just announced that she will seek re-election in 2024 for a third term, also made headlines this week for rolling out an expansive plan to protect student loan borrowers and reduce their debt loads.
The eight-part plan was detailed in a March 26 letter to U.S. Secretary of Education Miguel Cardona. It was sent amid a period of uncertainty about the Biden administration’s loan forgiveness plan, which is under attack both legally and politically and might never see the light of day.
Warren, an outspoken advocate for progressive causes, took particular aim at for-profit colleges that don’t deliver on their educational promises to students. In her letter, the senator wrote that she supports reestablishing the Office of Enforcement within the Office of Federal Student Aid to conduct oversight of “bad actors” in the higher education industry. Schools that don’t comply would lose their accreditation and access to federal aid.
Beyond that, Warren offered her support for a Biden administration proposal that would expand loan forgiveness for lower-income students by making changes to income-driven repayment plans.
That proposal, announced in January, would allow undergraduate borrowers to pay no more than 5% of their monthly discretionary income on undergrad loans. It also would raise the amount of income that is considered non-discretionary and is consequently protected from repayment.
“Under this proposed rule, no borrower earning under 225% of the federal poverty level would have to make a monthly payment,” Warren wrote in the letter. “When this rule is finalized and implemented, the Department should collect and publish information from institutions on their percentage of graduates who make $0 monthly payments. This information can be useful to borrowers in determining the return on investment of an educational institution.”
Here is a rundown of the eight actions Warren said the Education Department should take:
Ensure that institutions that fall below standards are subject to provisional Program Participation Agreements that set out “strong corrective conditions” with closely supervised, measurable benchmarks for improvement. Schools that fail to improve would have their Title IV funding revoked.
--Strengthen enforcement of for-profit colleges’ “manipulation of cohort default rates.”
--Review college conversions to ensure “co[n]vert for-profit” colleges are not redirecting funds to benefit private parties at the expense of students.
--Use the Education Department’s authority to hold for-profit college owners and executives personally financially liable when the colleges they run “fail or lie” to students who take on massive student loan debts.
--Improve oversight of online program management companies and their incentive compensation arrangements with colleges.
--Conduct more stringent oversight of school accreditors, including terminating Education Department recognition of accreditors.
--Conduct fair lending risk assessments and ensure all stakeholders in the federal financial aid programs are complying with fair lending and civil rights laws.
Re-institute and strengthen Gainful Employment rules and ensure that low-quality programs are “swiftly held accountable.” The goal is to prevent “further financial harm” to students who might end up in low-wage jobs or with debts that are not affordable relative to their actual incomes.
https://finance.yahoo.com/news/student-loan-crackdown-elizabeth-warren-111055015.html
Yaёl Bizouati-Kennedy
Mon, March 27, 2023 at 7:00 AM GMT+9·
The Biden administration has yet again quietly updated the timeline for borrowers seeking student loan forgiveness under a one-time account adjustment, according to reports.
In April 2022, the Department of Education announced updates that “will bring borrowers closer to forgiveness under income-driven repayment (IDR) plans.” Said updates include a one-time adjustment of IDR payment counters “to address past inaccuracies and permanently fixing IDR payment counting by reforming ED’s IDR tracking procedures going forward,” the department stated.
As the Student Borrower Protection Center (SBPC) indicated, IDR was originally designed to offer borrowers a reduced monthly payment tied to their income, not their outstanding balance.
“In theory, federal law also provides that after a 20 or 25 year IDR repayment term, the borrower’s debt is canceled in full. However, in recent years, investigations by SBPC and the National Consumer Law Center, National Public Radio, and the Government Accountability Office revealed widespread problems with IDR,” the SBPC wrote in a January 2023 post.
Forbes reported that when the Education Department announced the one-time adjustment last April, the guidance indicated that borrowers could start receiving student loan forgiveness by the fall of 2022, and that all others should receive their one-time retroactive credit by January.
Then, in an updated guidance statement delivered October 2022, the department “maintained that borrowers eligible for immediate student loan forgiveness would still receive those benefits under the IDR account adjustment before the winter of 2022,” and that “all other borrowers would not receive retroactive IDR credit until July 2023,” according to Forbes. In a further December 2022 update, the department extended this timeline further, “pushing out expected student loan forgiveness under the adjustment to the spring of 2023, with all others receiving the benefits of the adjustment in the summer of 2023.”
And now, the key dates have been pushed even further, Forbes noted. In the latest guidance document released this week, the Education Department declared it still expects borrowers eligible for immediate student loan forgiveness under the IDR account adjustment to receive those benefits in the spring. But now, “All other borrowers will see their accounts update in 2024,” according to a press release - which, as Forbes noted, could translate to a delay of more than one year.
According to Forbes, the delays are due to Congress not providing additional funding to the Office of Federal Student Aid in a recent budget bill.
https://news.yahoo.com/student-loan-forgiveness-rule-quietly-170841968.html
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Student loans: Secret shoppers used to help sniff out predatory schools
Ronda Lee
March 23, 2023
The Education Department plans to use secret shoppers to determine if schools are engaging in practices that violate rules around federal student aid programs. The Federal Student Aid shoppers will assess recruitment, enrollment, financial aid, and other practices of higher education institutions to help spot potentially misleading or predatory practices, the Education Department said.
The initiative is part of a broader effort by the Biden administration to increase oversight of schools, improve student experiences, and hold low-performing and predatory schools accountable.
“Building the secret shopper program is a good investment that will return dividends towards protecting students and taxpayer dollars,” Kyra Taylor, a staff attorney at National Consumer Law Center, told Yahoo Finance. “But this is just the first step [and] investigation alone is not enough. The Department must take bold steps to shut poorly performing schools down and to provide all borrowers who attended those schools with relief.”
Shoppers will specifically be on the lookout for misrepresentations related to the following:
Transferability of credits
Job placement rates
Completion and withdrawal rates
Graduates’ future earning potential
Career services
Cost of attendance
Amount of federal student aid
Accreditation status
Other practices that could violate regulations that govern participation in the federal student aid programs
If any misrepresentations are found, they can be used as evidence to support the enforcement division of the department or the Office of Inspector General’s investigations. “Secret shopping is another tool in FSA’s toolbox as we expand our oversight work to hold predatory schools accountable,” Richard Cordray, chief operating officer at Federal Student Aid (FSA), said in a press release. “Our focus - as always - is to ensure that students, borrowers, families, and taxpayers are not being preyed upon to make a quick buck.”
Predatory and low-value schools have been a focus of the Biden administration and contribute to the student debt crisis, leading to debt discharges related to the closed school loan discharge and borrower loan defense discharge programs. If a school closes while students are enrolled, federal student loan borrowers can have their loans discharged. If a school made fraudulent misrepresentations that caused a student to enroll, they can use the borrower loan defense to get their federal student loans discharged.
Borrower defense applications surged after the Obama administration cracked down on predatory for-profit colleges in 2015 and created new regulations, like borrowers’ defense and the gainful employment requirement. But the mechanism for defrauded borrowers seeking debt relief broke down during the Trump administration under then Education Secretary Betsy DeVos, with the department systematically denying relief claims in form denials.
Under the Biden administration, the Department has discharged $11.4 billion in student loan debt related to the borrower loan defense discharge for students at ITT Tech, DeVry University, Corinthian College, and Westwood College.
Credits that students earned at ITT weren’t transferable, and many ITT campuses lacked internet and training equipment, according to ED findings. Corinthian College was accused of misrepresentations about finances and job placement rates.
Westwood College made "substantial misrepresentations" about job placement rates, including “misleading guarantees” about getting jobs in their field of study, “assurances of unrealistic post-graduation salaries,” and exaggerations about “the transferability of its credits” when the institution knew those credits “would rarely transfer,” according to ED findings.
In addition to the secret shoppers, last year FSA released two bulletins to protect veterans and service members from schools making misrepresentations on the GI Bill and to set up a tip hotline so consumers can report any potential violations of laws for federal student aid programs.
In 2021, the administration also reinstated the Office of Enforcement within Federal Student Aid in charge of school oversight and accountability efforts.
“Schools that engage in fraud or misconduct are on notice that we may be listening and they should clean up accordingly,” Kristen Donoghue, chief enforcement officer at FSA, said in the press release. “But schools that treat current and prospective students fairly and act lawfully have nothing to fear from secret shopping.”
Ronda is a personal finance senior reporter for Yahoo Finance and attorney with experience in law, insurance, education, and government. Follow her on Twitter @writesronda
https://finance.yahoo.com/news/student-loans-secret-shoppers-used-to-help-sniff-out-predatory-schools-204455821.html
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Student Loan Crackdown: Elizabeth Warren Pushes Sweeping Overhaul of College Debt System - and Even More Forgiveness
Vance Cariaga
Wed, March 29, 2023 at 8:10 PM GMT+9·
U.S. Sen. Elizabeth Warren (D-Mass.), who just announced that she will seek re-election in 2024 for a third term, also made headlines this week for rolling out an expansive plan to protect student loan borrowers and reduce their debt loads.
The eight-part plan was detailed in a March 26 letter to U.S. Secretary of Education Miguel Cardona. It was sent amid a period of uncertainty about the Biden administration’s loan forgiveness plan, which is under attack both legally and politically and might never see the light of day.
Warren, an outspoken advocate for progressive causes, took particular aim at for-profit colleges that don’t deliver on their educational promises to students. In her letter, the senator wrote that she supports reestablishing the Office of Enforcement within the Office of Federal Student Aid to conduct oversight of “bad actors” in the higher education industry. Schools that don’t comply would lose their accreditation and access to federal aid.
Beyond that, Warren offered her support for a Biden administration proposal that would expand loan forgiveness for lower-income students by making changes to income-driven repayment plans.
That proposal, announced in January, would allow undergraduate borrowers to pay no more than 5% of their monthly discretionary income on undergrad loans. It also would raise the amount of income that is considered non-discretionary and is consequently protected from repayment.
“Under this proposed rule, no borrower earning under 225% of the federal poverty level would have to make a monthly payment,” Warren wrote in the letter. “When this rule is finalized and implemented, the Department should collect and publish information from institutions on their percentage of graduates who make $0 monthly payments. This information can be useful to borrowers in determining the return on investment of an educational institution.”
Here is a rundown of the eight actions Warren said the Education Department should take:
Ensure that institutions that fall below standards are subject to provisional Program Participation Agreements that set out “strong corrective conditions” with closely supervised, measurable benchmarks for improvement. Schools that fail to improve would have their Title IV funding revoked.
--Strengthen enforcement of for-profit colleges’ “manipulation of cohort default rates.”
--Review college conversions to ensure “co[n]vert for-profit” colleges are not redirecting funds to benefit private parties at the expense of students.
--Use the Education Department’s authority to hold for-profit college owners and executives personally financially liable when the colleges they run “fail or lie” to students who take on massive student loan debts.
--Improve oversight of online program management companies and their incentive compensation arrangements with colleges.
--Conduct more stringent oversight of school accreditors, including terminating Education Department recognition of accreditors.
--Conduct fair lending risk assessments and ensure all stakeholders in the federal financial aid programs are complying with fair lending and civil rights laws.
Re-institute and strengthen Gainful Employment rules and ensure that low-quality programs are “swiftly held accountable.” The goal is to prevent “further financial harm” to students who might end up in low-wage jobs or with debts that are not affordable relative to their actual incomes.
https://finance.yahoo.com/news/student-loan-crackdown-elizabeth-warren-111055015.html