Debt Forgiveness Plan Raises Concerns for College Groups

An Obama administration proposal to make it easier to pursue student loan debt forgiveness has organizations representing both nonprofit and for-profit colleges raising some big questions.

The new rule would “establish a new federal standard and a process for determining whether a borrower has a defense to repayment on a loan based on an act or omission of a school,” according to a Department of Education notice of proposed rulemaking  (opens in a new tab).

A report by The Hill  (opens in a new tab)earlier this month notes that backlash is particularly strong among for-profit colleges, who have faced controversy in recent years related to the bankruptcy of Corinthian Colleges, Inc. The company, which shut down last year, was ordered by a San Francisco court to pay more than $1 billion in penalties  (opens in a new tab) for defrauding students and falsely advertising its job-placement rates.

(Concerns linger, however, that former Corinthian students will never see much of the money lost, which led to a class-action lawsuit  (opens in a new tab), filed earlier this week.)

Career Education Colleges and Universities, a trade group that represents for-profit higher education institutions (and that until last month  (opens in a new tab) was known as the Association of Private Sector Colleges and Universities) has pledged to fight the changes.

“What we are going to do is put the rule in the context of the totality of the assault on the sector and reality of the impact,” CECU President and CEO Steve Gunderson told The Hill. “The reality is, this regulation, as drafted, destroys the sector.”

Nonprofit higher ed groups, including the National Association of Independent Colleges and Universities and the National Association of College and University Business Officers, are also concerned. NAICU, which supports some degree of debt forgiveness, argued that the language in the proposal is too broad.

“It’s possible we could find ourselves in the line of fire, some of our schools,” NAICU’s Maureen Budetti told Inside Higher Ed  (opens in a new tab). “The [education] secretary’s given quite a bit of leeway.”

Consumer and student advocacy groups welcomed the proposal, although some want to see stronger student protections, The Hill reported.

The Department of Education is accepting comments on the proposed rule until August 1 and will announce a final rule in November.