NAICU Washington Update

Partial Relief Plan for Defrauded Students Released

December 13, 2019

The Department of Education has published its methodology on how it intends to grant relief to defrauded students under the borrower defenses to repayment regulations.
The proposed methodology would rely on recently published program-level earnings data from the College Scorecard to compare the earnings of borrowers who have successfully filed a debt relief claim to the earnings of borrowers in unaffected programs. Rather than granting full loan relief to all successful claimants, the Department will instead create a sliding scale based on the earnings gaps between the comparison groups. The greater the earnings gap, the greater the debt relief awarded. The Department is calling its approach “tiered relief.”
The use of program-level earnings data, as published on the College Scorecard, would represent a new frontier in the use of federal data and metrics for institutional accountability purposes. The College Scorecard currently only publishes earnings data for graduates one year after a student has completed their academic program of study.  The data does not include non-completers or federally unaided students. Therefore, the Department’s proposed methodology, at least for now, would only cross-compare the earnings of the two subgroups just one year after leaving school. It will take several years for the Department to publish multiyear earnings data at the program-level, and such data limitations could pose significant implementation issues.
According to the methodology, defrauded borrowers at or lower than two standard deviations from the median earnings of graduates of similar programs at other schools will be awarded 100 percent relief from their federal student loans. Successful claimants whose earnings are higher than two standard deviations below the median, but lower than the median of the comparison group will be awarded 25 percent, 50 percent, or 75 percent relief.
It is unclear whether the proposed debt relief methodology will pass muster with the federal courts, and further litigation is likely.

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