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Student Loans Are Erased When This Happens

New rules from the Department of Education could make it easier for students to have their federal loans forgiven in cases where colleges are found guilty of fraud or misconduct.

The initiative is supposed to be the first step to helping students find financial relief if they find themselves bamboozled by the for-profit higher education system. 

"Today’s regulations build on that progress by ensuring that students who are lied to and mistreated by their school get the relief they are owed, and that schools that harm students are held responsible for their behavior," said Education Secretary John B. King Jr. in a statement, according to Fortune.

As of 2010, more than 2.4 million people enrolled in for-profit universities, believing that higher education would be the path to securing a job. Students were often misled by false advertising and convinced to borrow thousands of dollars to attend these schools.

Many graduated from these schools with few skills and high levels of debt, with students defaulting on their loans at record rates, The New York Times report. Research shows that those students, on average, leave school with lower earnings than when they entered.

The Department of Education has been cracking down on this crisis, closing for-profit schools like ITT Technical Institute and Corinthian Colleges. But now, new legislation makes it easier for students to actually have their debt forgiven if a school completely misrepresented the nature of the program, the cost of attendance and the rates of finding a job post-graduation, according to The Washington Post.

In cases of widespread fraud or misconduct, students can have their debts erased even if they don't officially file for loan forgiveness, according to Fortune. Students who attended schools that have closed will get full debt relief, given that they have not re-enrolled in another school. 

Colleges with high numbers of students who fail to repay their loans after graduation will also have to disclose this fact in advertisements. 

For-profit schools have been lobbying heavily against the new rules ever since they were first proposed. They claim the government is attempting to close their industry completely and that thousands of students could miss the opportunity to attend a career-focused institution. 

"This complex and burdensome regulation will crush career education with financial requirements not imposed on others in higher education -- including institutions that have lower graduation rates and higher default rates," said Steve Gunderson, CEO of the for-profit lobbying group Career Education Colleges and Universities, according to Fortune.

Gunderson made it clear that the group intends to fight the legislation and will look closely at the rules to “determine our appropriate action.”

Sources: Fortune, The Washington Post, The New York Times / Photo credit: Nazareth College/Flickr

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