The Wilfred students are getting their loans canceled under a federal law that allows borrowers to apply for loan forgiveness if the schools they attended falsely certified them as eligible for loans. Congress passed the statute in 1992 after a Senate panel concluded that “a virtually complete breakdown in effective regulation and oversight had opened the door for fraud, abuse, and other serious problems at every level.”
The discharge system was overwhelmed by applicants after a wave of for-profit failures that included Corinthian Colleges (which closed in 2015) and ITT Technical Institute (closed in 2016). The Obama administration, which initiated a crackdown against abuses by predatory for-profit colleges, revised and enlarged what is known as the borrower-defense process, but the new rules, scheduled to take effect July 1, were delayed by the Trump administration’s education secretary, Betsy DeVos.
The rules, Ms. DeVos said when she postponed their being carried out, resulted in a “muddled process that’s unfair to students and schools, and puts taxpayers on the hook for significant costs.” The for-profit college industry has blasted the new borrower-defense regulations, arguing that they could lead to financial ruin.
