At the start of September, the student loan watchdog abruptly resigned his post. He cited in his resignation that the Trump administration was doing little to protect students. His job is to take on legitimate fraud cases to keep the process fair for students. This type of fraud used to result in the student receiving full student loan forgiveness benefits. Not any longer.
In recent years, for-profit schools have developed a reputation for using aggressive marketing tactics. Likewise, these tactics include promising ultra-high job placement rates. They even offer to help the student connect with employers. These promises ultimately proved fruitless. Students continue to rack up massive amounts of student loan debt.
Student Loan Forgiveness Under Trump
President Trump and Education Secretary Betsy DeVos aren’t real fans of student loan forgiveness. Their attempt to wipe out the program instituted by the Obama administration wasn’t successful. At one time, if a student was swindled or defrauded by their school they could have their student loan debt forgiven. Reluctantly, the Trump administration agreed to keep the program intact for the 2018 budget season.
DeVos is in favor of a different type of program. She appears to be in favor of a new tiered relief policy based upon income.
There were 16,000 claims of fraud against for-profit colleges. Only 1,000 of those cases received full student loan forgiveness. The rest received varying degrees of forgiveness. It was all based around their income after they graduated. In total, only 48,000 claims of fraud and abuse were approved out of the 165,000 filed since Obama started the program.
A Balanced Approach?
On average, DeVos’s education department has only forgiven around 30% of a student’s loan. They compare the earnings after graduation to other students who have graduated from the same program at other schools. Still, while the Obama administration never denied a fraud request, the Trump administration has dismissed over 9,000 cases.
Because of this, critics of DeVos and this new tiered program say she’s in the pocket of for-profit schools. They say she brought in officials from these schools to help serve within the agency. They appear to be serving the interests of the schools by easing regulations and making it tougher for students. However, according to DeVos, this is just a more balanced approach.
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“No fraud is acceptable, and students deserve relief if the school they attended acted dishonestly. (This new process) will allow claims to be adjudicated quickly” and “also protects taxpayers from being forced to shoulder massive costs that may be unjustified,” said DeVos.
Along with President Trump, she believes it’s unfair for taxpayers to bear the brunt of paying for full student loan forgiveness. With this new program, she feels that it’s a more balanced approach to helping students. Yet, while fraud happens, students still receive a degree and find meaningful work after graduation.
The Crisis Rages On
The Obama administration appeared to take the situation much more seriously. They went after the significant for-profit schools that were using deceptive processes. ITT Tech and Corinthian College are shut down. Many thousands of students had their debt erased at a total of $550 million.
Student loan debt rose to over $1.5 trillion and continues to climb. It’s a crisis likely to continue. Now that the economy is doing better, students won’t be as desperate to seek a degree for meaningful work. They’ll have the tools they need to understand their student loans. It won’t be easy. Life can be difficult with the burden of loan debt. In fact, many students will suffer for decades. Still, the government will continue to debate this for decades to come.
Before starting college, educate yourself. Financial Helpers is here to get you through the process. If you have any questions, don’t hesitate to call us at the number below:
