For-profit loan forgiveness program could see major cut

WASHINGTON -- The Education Department's plan to provide only partial relief to some students defrauded by for-profit colleges could reduce overall payments by about 60 percent, according to a preliminary analysis obtained by The Associated Press.

The agency announced in December it was discontinuing the Obama administration's practice of fully wiping out the loans of students deceived by the now defunct Corinthian Colleges under the so-called borrower defense rule.

The department said some students will now be getting only partial loan forgiveness in order to make the process fair and protect taxpayers from excessive costs. The agency will look at average income for specific programs to determine if the loans should be forgiven fully or partially.

A department document drafted in the fall and viewed by the AP shows such an approach could cut the overall amount of relief granted to students by around 60 percent. To arrive at the initial estimate, officials looked at student loans forgiven in their entirety to determine the impact had partial relief been granted.

Education Department Press Secretary Liz Hill said in a statement Tuesday, "This is not an official calculation from the Department of Education. It is an impossible calculation to make at this stage in the process as we continue to adjudicate claims."

Critics said the idea of partial relief was unfair since thousands of Corinthian students had already had their loans canceled in full under Obama. The agency said in December it had tens of thousands of claims from Corinthian students still pending.

The action comes as Education Secretary Betsy DeVos rewrites regulations governing student protections with regard to for-profit schools. Last year she froze two Obama-era rules meant to put additional checks on for-profits. Critics point to the Trump administration's ties with the sector and accuse the department of protecting industry interests, but DeVos says the Obama rules were too broad and could be misused at taxpayers' expense.

Eileen Connor, a litigator at Harvard University's Project on Predatory Student Lending, which has represented hundreds of defrauded Corinthian students, criticized the projections.

"I think that is terrible, it's another example of the Department of Education picking the side of fraudulent schools and not doing right by those who have been hurt by them," said Connor. "And we have every intention of channeling the department's action in this regard."

When announcing the partial relief program, DeVos said "no fraud is acceptable, and students deserve relief if the school they attended acted dishonestly." But she added the process also "protects taxpayers from being forced to shoulder massive costs that may be unjustified."