New rules aim to help students clear loans in cases of fraud

Markets Associated Press

The Obama administration is issuing new rules meant to help students get their federal loans erased in cases where there's been fraud and misconduct by their schools.

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The Education Department drew up the new rules in response to thousands of claims from former students of the now-defunct Corinthian Colleges chain, which closed or sold all of its campuses last year amid allegations of fraud.

The rules set forth the conditions under which students can have their loans erased and put colleges on the hook financially for repaying loans instead of taxpayers. They also ban schools from forcing students to sign agreements saying they won't sue over misconduct.

Thus far, 15,000 claims filed by former Corinthian students have been approved, leading the government to clear $247 million in loans.