The Trump administration is set to completely overhaul the laws and policies set by the Obama administration. This time, it affects thousands of individuals who are longing to go debt free, in particular with their student loans. These people are former students of fraudulent schools. The argument is that numerous cases ruled as fraud are yet to receive just compensation. Apparently, the government is putting the plug on giving the money to its rightful owners.
In light of this, the new Department of Education Secretary Betsy DeVos submitted a policy in-the-making that will change the way student loan forgiveness is handled. While she believes that no student should be treated in an unfair and harmful manner, she also believes that it is important to protect taxpayers from shouldering massive costs that could be unjustified. Advocacy groups, however, note that even those that have already been justified, still are unable to receive money from the government.
DeVos revealed that the compensation will now be income-based. That is, if your income bracket is less than half of the income of your peers, then you may just get full relief. However, those who earn half as much or even more than others who finished similar schooling may get proportional relief. If that is the case, a defrauded student who makes 70% of his peer’s income may only get 30% loan relief.
As of now, there are over 20,000 pending claims that the new policy will take effect on. It is said that those who had claims already approved by fool under the Obama policy will receive full compensation. Those who were marked for denial under Obama’s presidency have already been denied along with 8,600 other claims since the beginning of the Trump administration. In the meantime, DOE officials reveall that the agency has already approved 12,900 claims. Still, as stated beforehand, the approved amount will now be income-based.
It should be noted that DeVos is a strong supporter of vouchers and charter schools before the Trump administration. The new DOE Secretary is already under pressure to handle the major backlog of application for loan forgiveness in particular former students of the Corinthian network. It should be noted that Corinthian has shut down since 2015 imploring thousands of former students to file fraudulent claims.
The new policy will take effect soon. Everyone expecting to get some form of relief should adjust their expectations, especially those who are in the high-income bracket. It is difficult to say that this shouldn’t be the case, although critics would disapprove. Still, a large part of these ripped-off former students, even high-earning ones, have debt eating away into their salary. Should it matter if the income of a person is greater than his peers? Would it be a more fair treatment to compensate low-income ripped-off students and treat high-income ripped-off students differently? The new DOE secretary answers with the benefits it will give to taxpayers. We are yet to see the positive effects of this new policy, but in the meantime it looks like many high-income ripped-off students will remain in debt for a couple more years. Let’s just see if many of those in the lower income bracket do benefit from full relief.
If you would like more information regarding the new policies under the Trump administration, please contact Credit Advisors Council today.