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DeVos: Defrauded students may only get partial loan relief

By COLLIN BINKLEY

AP Education Writer

Students who are cheated by their colleges will receive full loan forgiveness only if they end up earning far less than their peers, while others will receive relief between 25% and 75% of their debt under new rules unveiled Tuesday by the U.S. Education Department.

The policy is a departure from the Obama administration, which provided full loan forgiveness in cases of fraud, and it marks the second time the Trump administration has attempted to provide only partial loan relief. A federal court blocked a previous attempt in 2018 after it determined the Education Department violated privacy laws to gather income information.

Education Secretary Betsy DeVos said the new policy provides a fair resolution to the “mess” inherited from the previous administration.

“We cannot tolerate fraud in higher education, nor can we tolerate furiously giving away taxpayer money to those who have submitted a false claim or aren’t eligible for relief,” DeVos said in a statement.

The policy devises a new formula to determine how much federal debt students should have erased under the department’s Borrower Defense program. The Obama administration expanded the program in 2016 to forgive debt for thousands of students harmed by the Corinthian Colleges chain, which shut down following findings that it had lied to students about job placement rates.

Since then, thousands of other students have applied for loan forgiveness after saying they were cheated by their schools, mostly for-profit colleges. But DeVos has been reluctant to provide full relief. In a call with reporters Tuesday, her principal deputy under secretary said the forgiveness program had become a “backdoor” route to free college.

“We want to make sure we really serve the borrowers who truly have been the victim of misrepresentation and harmed by it,” Diane Auer Jones said. “We wanted to protect the taxpayers. There are people who believe we should forgive 100% but where does that end?”

The new formula attempts to quantify the harm done to a student by comparing their estimated earnings to those from similar programs at other schools across the country.

If the median earnings in their program is more than two standards of deviation below the median at comparable programs, students are eligible for full relief. Others will get either 25%, 50% or 75% of their debt erased depending on the median income in the program they attended.

The policy immediately drew fire from critics who say defrauded students deserve full loan forgiveness.

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