Photographer: Michael Okoniewski/Bloomberg

Student Loan, Gainful Employment Rules Delayed, Official Says

October 2, 2018 Emily Wilkins
  • More time needed to reach final regulation, aide says
  • Student earnings data blocked after agency agreement expires

The Education Department will miss a crucial deadline to finalize a regulation on forgiving loans made to students who say colleges used deceptive recruiting, potentially giving those students an extra year of debt forgiveness under more lenient standards.

The delay comes after the department received more than 38,000 comments on its draft “borrower defense” regulation and needed more time to review them, a Trump administration official said Tuesday.

“We got a lot of comments. Some of them were very detailed, many of them were highly technical,” the official said in an interview with Bloomberg Government. “We are committed to taking the time that is necessary to review those comments and make sure we get it right.”

The missed deadline could give students who were defrauded by their college an additional year of loan forgiveness under the Obama-era “borrower defense” rule if a federal judge allows that rule to be reinstated on Oct. 12. In a case before the U.S. District Court for the District of Columbia, Judge Randolph Moss previously deemed Education Secretary Betsy DeVos’ delay of the Obama administration rule “arbitrary and capricious.”

Nov. 1 Deadline to be Missed

The department disclosed the delay in a filing in the case. Department lawyers informed Moss a final regulation would not be done by Nov. 1, but emphasized the department “remains committed to rescinding the 2016 Rule.”

Because the regulation carries out part of the higher education law (Public Law 110-315), it must be made final by Nov. 1 to go into effect for the first day of the school year—July 1, 2019. The administration official, who spoke on condition of anonymity ahead of the court filing, said the department won’t be able to meet that deadline with its proposed rule, thus pushing back the implementation date to July 2020 at the earliest.

DeVos has continued to discharge student loans, but reinstating the Obama-era regulation would favor borrowers by banning pre-dispute arbitration agreements and allowing for automatic discharge of a federal loan if a student’s school closes.

The Education Department has not given up on finalizing the new rule and is already looking at possible changes to its draft regulation. One of the changes under consideration is removing a provision requiring a student borrower to go into default before being able to apply to have a loan forgiven, according to the official.

Al Drago/Bloomberg via Getty Images
Education Secretary Betsy DeVos speaks during a Federal Commission on School Safety meeting in the Eisenhower Executive Office Building on Aug. 16, 2018.

‘Victory for Students’

Student advocates said the comments on the new proposal were signs of a larger issues with the department’s plan for the regulations.

Toby Merrill, one of the lawyers representing the student borrowers who sued the Education Department over the delay of the 2016 regulation, said the department officials should scrap efforts to revise it.

“This rule is so fundamentally flawed, no amount of time could put the Department’s proposal on strong legal footing,” said Merrill, the director of the Project on Predatory Student Lending.

Adam Pulver, an attorney with Public Citizen Litigation Group who is also representing student borrowers in the Washington, D.C., lawsuit, said the delay in a new rule’s implementation will give Moss more incentive to revive the 2016 regulation given how far away July 2020 is.

The official Twitter account for Democrats on the House Education and the Workforce Committee tweeted that the news was a “big victory for students and taxpayers.”

No Earnings Data

The department also will miss the Nov. 1 deadline for a regulation that evaluates vocational education programs’ effectiveness based on the cost of their students’ annual loan payments compared to their earnings.

That means the Obama-era version of that regulation, known as “gainful employment,” also remains in effect. The regulation would revoke funding from vocational programs where the average graduate’s income would make it difficult to repay student loans.

The administration official said the department has been collecting data from schools. Yet, there won’t be any data on student earnings per program as the Social Security Administration, the agency that provides the earnings data, allowed an information-sharing agreement between the two agencies to expire in May. The Education Department requested the SSA continue the agreement in a March 2018 letter obtained by Bloomberg Government.

Changing the source of the data from the SSA to another agency, such as the Internal Revenue Service, would require a rule change, which the official said wouldn’t be possible by Nov. 1.

The official who spoke with Bloomberg Government said the gainful employment rule will hopefully be finalized before the end of the year, although an exact timeline was hard to estimate given the role other agencies have in the regulatory process.

To contact the reporter on this story: Emily Wilkins in Washington at ewilkins@bgov.com

To contact the editors responsible for this story: Paul Hendrie at phendrie@bgov.com; Jonathan Nicholson at jnicholson@bgov.com; Robin Meszoly at rmeszoly@bgov.com

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