We’ve all had to borrow money at some point in our lives. When the matter turns to federal loans however, there are quite a bit more consequences, though those consequences can involve forgiveness of a different type – loan forgiveness.
When Obama was president, a policy was set in place after two for-profit colleges prompted students to borrow more than was needed, knowingly scamming them for hundreds of thousands of dollars in loans in order to attend their schools. The complaints of fraud didn’t stop there.
The majority of the complaints filed by students come from for-profit universities. These operate as profit-maximizing firms that offer both undergraduate and graduate degrees, and consist of approximately seven percent of all four-year colleges in the U.S. – with public schools constituting 23 percent and non-profit, private organizations constituting 70 percent.
The majority of schools are therefore public and non-profit, usually operated by state and/or local governments and have no residual shareholders. In this context, loan forgiveness is offered to borrowers that have been defrauded by their for-profit schools, of which there are approximately 7,000 in the United States.
To protect students from these institutions and students beyond from greedy institutions, Obama made it possible for students to seek total loan forgiveness through the federal government upon proving that their loans caused financial hardship.
This has been the subject of recent discord in the Department of Education, as the U.S. Secretary of Education Betsy DeVos has attempted to reverse said Obama-era policies that would make it easier for students to receive loan forgiveness. DeVos feared that this policy would prompt students to file false claims, due to lack of demand for substantial evident.
DeVos claimed Obama’s policy hurt taxpayers the most, as they would ultimately “foot the bill” for the funds lost by the government for potentially false claims of “fraud” by students. She pointed out that Obama’s policy didn’t demand a lot of hard evidence as to actual fraud or hardship – her sights remain on changing that.
DeVos proposed an alternative plan, wherein the amount of loan forgiveness offered would coincide with the approximate level of income that other students achieved after graduating from the same (or similar) programs.This notion came with the claim that her new policy would save taxpayers $700 million per year.
Meaning that forgiveness may only be partial instead of total, as opposed to Obama’s previous policy – it would all depend on how much money the students in similar programs make upon graduation.
Meeting rebuttal from the Supreme Court, the Obama-made policy meant to take effect for students seeking relief July 1 of this year has been stalled while the dust settles. DeVos continues to make headlines and enemies amongst students as her struggle in federal court carries on.