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There are new proposed federal rules that could make it possible for people to get their federal student loan debt forgiven – if they were misled or cheated by their colleges. There is already a "defense to repayment” process for getting relief from federal student loans but it is complicated and subject to different rules in different states. This process went practically unused until the collapse of Corinthian College. More than 23,000 claims for forgiveness have been filed since then and the government has wiped out the debt of more than 2000 people so far.
Where it gets murky
These proposed regulations are meant to protect student borrowers and taxpayers against predatory practices by postsecondary schools and especially for-profit colleges. They strengthen and clarify existing regulations and would streamline relief for federal student loan borrowers who have been wronged. According to these new regulations Direct Loan borrowers that believe they have been damaged by their schools could seek relief by having their loans discharged.
However, where these new regulations get murky is that, according to opponents, they’re written too broadly. You say you got a degree in Visual Arts from Columbia and can’t find a job? Then, according to these new regulations, you could get your federal loan discharged by showing you were “deceived” or “defrauded” by the university. In fact, American Commitment President Phil Kerpen has said, “… these newly proposed rules are so broad and vague that complaints will proliferate based on innocent errors and alleged misunderstandings — with the costs shifted to federal taxpayers.”
So the good news is if you can make the case that your school deceived you, you might not have to repay those student loans. But someone will end up repaying them and, as is usually the case, that someone will be us, the American taxpayer.