According to new information obtained by the Associated Press, the U.S. Department of Education plans to cut relief payments made to students defrauded by for-profit schools. The AP reported Wednesday that they had seen an internal estimate stating that the payments would likely be reduced by as much as 60%.
The new plan involves the Borrower Defense rule, a statute that was overhauled by the Department of Education during President Obama’s administration. The rule provides financial payments to students whose schools closed due to institutional misconduct. It also gives students who attended fraudulent schools the option to discharge their student loan debts. Many of the students eligible for the program were defrauded by Corinthian Colleges.
Corinthian Colleges, a network of over 20 for-profit schools, was shuttered in 2015 for predatory recruiting practices and misleading student loan programs. The Department of Education fined the organization $30 million, effectively shutting it down. Other government agencies such as the Consumer Financial Protection Bureau and the state governments of California, Massachusetts and Wisconsin also filed suit. The fallout from the suits and the closure of the schools resulted in thousands of students being left with large loans that they could not pay, and the Department of Education elected to expand the Borrower Defense rule to provide these students with relief.
The Department of Education announced in December that they plan to scale back their loan relief program due to its high cost. Rather than providing full relief from outstanding student loans, the new plan would only grant partial relief to students. The new estimates have emerged at a time when the department has not yet officially finalized their plans. A government spokesperson said that the numbers reported by the AP are not definitive and that the agency does not currently have an idea of how much they will cut student relief.