Federal officials would also take greater control in the process. They would replace the current "state standard" for handling claims with a federal standard they say clearly defines misrepresentation.
Some organizations criticized the proposed changes. They said it will require students to provide more documentation to prove abusive loan practices.
“Under this rule, the Department goes further than any proposal discussed at negotiated rulemaking, proposing that relief be limited to borrowers in default in addition to very limited access to relief,” said Ashley Harrington, a policy counsel with the Center for Responsible Lending. “A better solution to this growing financial burden would be preventing as many defaults as possible and holding institutions to a higher standard.”
Politicians, educators and students have pushed for ways to better protect students from questionable lending practices by some for-profit colleges in recent years.
Federal officials have been working on the proposed changes for months. The proposed regulations will be open for public comment over the next 30 days.