Trump administration unveils student loan borrowing reforms

Federal education officials announced plans Wednesday they say will better protect student loan borrowers, particularly those at for-profit colleges and universities, but make students more responsible for their decisions.

The proposed changes include:

  • expanding from 120 days to 180 days the period of time during which students who left an institution prior to its closure are eligible for a closed school loan discharge while at the same time incentivize closing institutions to engage in orderly teach-outs, which enable more students to complete their program
  • students who took federal loans would be able to have their complaints settled more quickly and to receive not only loan discharge, but potentially also compensation for financial losses and educational opportunity costs. 
  • Prevent guaranty agencies from charging borrowers a fee if a defaulted loan goes into repayment within 60 days.

“Institutions are prohibited from misleading students by providing false or incomplete information, and remedies should be provided to a student when misrepresentation on the part of an institution causes financial harm to that student,” the department said. “ However, students also have a responsibility when enrolling at an institution or taking student loans to be sure they have explored their options carefully and weighed the available information to make an informed choice.”

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.