Dept. of Education issues new policy for defrauded students

Dec. 20 (UPI) -- The U.S. Department of Education on Wednesday announced new guidelines on loan relief for students who were defrauded by Corinthian Colleges, Inc.

Student loan debtors will now receive relief based on their income in comparison to their peers. For example, those who are earning 49 percent or less of what their peers earn will receive 100 percent relief on their loans. And those making 90 percent or more, will receive 10 percent relief.

The new guidelines are a departure from the Obama administration policy that granted full relief to most students defrauded by the for-profit Corinthian college system, which misled students on employment and income guarantees after graduation.

Education Secretary Betsy DeVos said the new process is an "improvement" over the Obama policy and "protects taxpayers from being forced to shoulder massive costs that may be unjustified."

But critics of the new policy say it does too little to help students who took out large federal loans to invest in their future, only to be scammed by a now-defunct college.

"The only 'improvement' to this process is that they are going to start limiting relief to defrauded borrowers," Abby Shafroth, a staff attorney at the National Consumer Law Center, told Buzzfeed News. "It doesn't make any sense. I don't think there's a basis in law for what they're doing."

After President Donald Trump took office in January, the Department of Education paused all loan relief applications until a new process on how to handle student loan relief for Corinthian students was implemented.

The pause created a backlog of loan relief applications, according to an inspector general report published earlier this month. But with Wednesday's announcement, the Department of Education said it approved for discharge 12,900 pending claims submitted by former Corinthian students, while 8,600 pending claims have been denied.

"This action includes claims that have been received during this administration," the department said. "Many of the denied claims were identified for denial, but not acted on, by the prior administration."