Federal Government Proposed Simpler Process for Students Applying for Loan Forgiveness

The Obama administration yesterday issued new rules that will help students with loan forgiveness who were misled or defrauded by their universities.

Under the old rules, students could apply to have their student loans forgiven if they could prove that the college or university used illegal tactics to persuade the students to take out financial aid. Now, a breach of contract or judgment against a college or university would trigger a forgiveness. Students will also now have six years to apply, up from a two-year window previously.

Forgiveness of student loans has become a divisive political topic following the collapse of Corinthian College two years ago. That failure led to thousands of applications for forgiveness being filed with the Department of Education, which led the agency to take steps to address the process.

Some advocates, however, are complaining that the new federal program does not go far enough, especially when compared to its predecessor.

For-profit colleges would also be banned from using mandatory arbitration clauses, class-action waivers, and gag rules.

“The Obama administration won’t sit idly by while dodgy schools leave students with piles of debt and taxpayers holding the bag,” Education Secretary John B. King Jr. said on a call with reporters Monday. “Students who are defrauded deserve an efficient, transparent and fair process to get the loan relief to which they are legally entitled.  And schools that harm their students should be on the hook for the damage.”