New Loan Rules Would Help Students Who Were Victimized by Unethical Trade Schools
The U.S. Department of Education last month proposed rules that would make it easier for the agency to forgive the loans of students who were victimized by unscrupulous trade schools. The proposed regulations were in response to a decision by a federal appeals court last year that invalidated requirements that the department had imposed on students who asked to be relieved of their debt burden.
In the late 1980s and early '90s, it was reported that some trade schools were operating unethically — admitting and receiving federal aid for people who were ineligible for the loans because they had never graduated from high school and had not been required to demonstrate that they could benefit from the school's training.
Department officials and lawmakers suspected the schools were taking the aid for those students, many of whom were poor. Many students later defaulted on loans they didn't even know they had borrowed.
Originally, the department agreed to discharge these students' loans, but only after they demonstrated that they could not get jobs in the fields for which they were supposed to have been trained. However, consumer advocates say that the department's rules were too strict and that many of the students who had been taken advantage of were stuck with large debts.
In November, the U.S. Court of Appeals for the District of Columbia struck down the department's requirements, stating that a student's post-training work experience was irrelevant to the question of whether the student had been eligible to receive the loans in the first place.
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