Rule would ease loan debt relief to students at rogue for-profit schools

The Obama administration is trying to make it easier for students who have been misled or defrauded by their colleges to have their loans forgiven.

A rule proposed Monday would lay out a clear relief process for borrowers who believe they were lied to about job prospects after college or otherwise deceived in order to enroll in the school. It also aims to hold schools accused of fraud or at financial risk more accountable by requiring them to notify prospective and enrolled students, as well as set aside money that could help cover future claims against the school.

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The proposal follows the collapse last year of Corinthian Colleges, one of the largest for-profit college companies.

The proposal, expected to be in place by July 2017, would streamline debt relief for groups of students if they all experienced the same misconduct by a school, such as instances of wide misrepresentation — meaning they all wouldn’t have to file individual applications for loan forgiveness.

The new provisions also would bar schools from forbidding students from class-action lawsuits as part of enrollment agreements, something Corinthian had done.

California’s attorney general filed a lawsuit in 2013, alleging rampant lies to students about job placement. Corinthian filed for bankruptcy protection last year, closing schools and leaving thousands of students with hefty debt and frustrated in their efforts to earn degrees.

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The U.S. Education Department has so far erased the debt for more than 8,800 former Corinthian students, totaling more than $132 million. But that’s only a small fraction of the estimated $3.6 billion in federal loans given to Corinthian students.

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