Posted Feb 04, 2016 05:45 am CST
A once-obscure federal law is being cited by more than 7,500 borrowers who are applying to have their student debt erased because their schools allegedly used illegal recruiting tactics.
The law provides for forgiveness of debt borrowed from the federal government’s Direct Loan program when schools violate a state law during the recruiting process, the Wall Street Journal (sub. req.) reported last month. An example would be a school that lies about how many of its graduates landed jobs, the Wall Street Journal says in a companion article.
The law doesn’t provide specifics on what is needed to prove fraud by a school. The U.S. Education Department is drafting rules to provide clarification. The rules will also address when the department can seek to claw back forgiven loans from the schools.
So far most of the borrowers seeking loan forgiveness attended for-profit colleges, and three quarters of those colleges were owned by now-defunct Corinthian Colleges. But Above the Law says some underemployed and jobless law grads may want to apply for loan forgiveness in the program, known as “borrower defense” or “defense to repayment.”
Above the Law sees a benefit beyond individual borrowers who might be able to benefit: “If enough borrowers are granted relief under the borrower defense program,” the blog says, “the Department of Education will eventually start investigating law schools that continue to admit underqualified students who end up with no jobs and are unable to pass the bar exam.”