Students who were defrauded by the for-profit Corinthian Colleges may not get their loans forgiven entirely, the Education Department announced Wednesday, in a reversal of the Obama administration policy of wiping out the debt.
Under President Barack Obama, tens of thousands of students deceived by the now-defunct schools had more than $550 million in federal student loans canceled in full.
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But Education Secretary Betsy DeVos announced Wednesday she is putting a new process in place that she says is more efficient and fair. The department will now look at average income for specific programs to determine if the loans should be forgiven fully or partially.
For instance, if a student who attended a nursing program at Corinthian is earning less than 50 percent of what the average income is for graduates of similar programs, he or she will get their entire loan wiped out. But a student earning more than 70 percent of average earnings would get only 30 percent of the loan canceled.
"No fraud is acceptable, and students deserve relief if the school they attended acted dishonestly," DeVos said in a statement. "This improved process will allow claims to be adjudicated quickly and harmed students to be treated fairly. It also protects taxpayers from being forced to shoulder massive costs that may be unjustified."
Corinthian students who had their claims approved in full under the Obama administration, even if the money hasn't been disbursed, will see the payments in full. The change will affect students whose claims had not been decided by Jan. 20, the date of President Donald Trump's inauguration. The decision will affect more than 20,000 pending claims.
Student advocates criticized the decision.
"It's unfair and it's unlawful and arbitrary," said Eileen Connor, a litigator at Harvard University's Project on Predatory Student Lending, which has represented hundreds of defrauded Corinthian students. Connor said these students wasted not only money, but time.
"With respect to the clients that I've seen, the idea that any of them should get partial relief is really contrary to the facts and the law. It would be like somebody showing that their car has been stolen and the department giving them back a door."
Critics say the Trump administration has deep ties to the for-profit sector and is looking out for industry interests at the expense of students. Earlier this year, Trump paid $25 million to settle charges his Trump University misled students. DeVos has filled several senior positions at the Education Department with for-profit officials.