The Obama administration on Friday rolled out new regulations designed to help students dealing with loan debt from shuttered for-profit college chains.
The regulations from the U.S. Education Department should make it easier for students to get debt relief if they can show their school misled them. Under the new rules, troubled colleges must also set aside money to cover the costs to taxpayers if they close.
“To protect students from the start, the regulations seek to deter institutions from engaging in predatory behavior or otherwise exposing the government to risk,” U.S. Under Secretary of Education Ted Mitchell said in a statement. “The rule will protect taxpayers by requiring institutions to put up collateral when they’re at risk of closure. For students who are injured by an institution’s conduct, these regulations provide a clear path to relief with all of their rights intact, and restore their right to sue.”
The changes come after the high-profile collapses of the for-profit chains Corinthian Colleges and ITT Technical Institute, which left tens of thousands of students with debt and no degrees. More than 80,000 students are seeking debt relief, most of them former Corinthian students.
So far, the federal government has approved more than 15,000 debt-relief claims worth more than $247 million.
Consumer rights advocates are applauding the new regulations, but say they don’t go far enough.
“Let's ensure institutions are financially and academically healthy so that we don't have to deal with precipitous closures,” said Barmak Nassirian with the American Association of State Colleges and Universities.
Many for-profit and some non-profit schools say the rules go too far, and will cost them millions of dollars they don't have.