Biden’s plan to stop profits piling student debt on veterans
- The Department of Education unveiled new regulatory proposals to protect veterans and military personnel.
- He proposed reforms to a rule that led to aggressive recruitment of veterans for profit.
- The department has also proposed expanding the Pell Grant program for incarcerated people.
President Joe Biden’s Education Department just unveiled more plans to reform the student loan industry, and this time they focus on veterans, the military, and incarcerated people.
On Tuesday, the Department of Education released regulations that would reform the U.S. bailout to better protect veterans and service members from predatory practices by for-profit colleges.
The main change in question concerns a provision known as the “90/10 rule”, which requires that at least 10% of a for-profit school’s funds come from sources other than any federal aid, but aid Federal Veterans Affairs and Services members can count toward that 10%. This loophole led to aggressive recruiting tactics because, as the department put it, “every dollar brought in by them meant they could receive $9 more in aid from the Department of Education without needing to guarantee a private investment. The proposals published by the ministry aim to change this.
“Predatory and deceptive practices that target veterans and the military have no place in higher education, period,” Education Secretary Miguel Cardona said in a statement. “The Biden-Harris administration believes that educating our veterans and service members should be about honoring their contributions to our country, not exploiting them for financial gain. These proposed regulations enact welcome changes by Congress. to better protect students who have served, and continue to serve, our nation.”
Here’s how the department plans to reform the 90/10 rule and better protect veterans, according to a fact sheet:
- For-profit colleges are required to include all federal aid — not just Title IV aid — in their 90/10 calculations.
- For-profit colleges are limited on when they can count institutional loans (debt held by the school) and alternative funding (such as revenue-sharing agreements) as non-federal revenue
- And for-profit colleges that violate the 90/10 rule are required to notify the department and its students “in a timely manner.”
The department has already taken some steps to prevent veterans from taking on student debt that they cannot afford. In March, federal student aid director Richard Cordray outlined in a bulletin the enforcement action his agency will take against schools that mislead service members, saying some students “even report that student loans were taken out in their name without their knowledge”.
Along with reforms to the 90/10 rules, the department also offered clarifications to ensure students and taxpayers are protected when schools undergo ownership changes, such as a conversion from a for-profit to a nonprofit. nonprofit, as well as the extension of Pell Grants to incarcerated individuals, in which they can access assistance to enroll in post-secondary programs while incarcerated.
These proposals are expected to enter a 30-day public comment period, with the aim of being finalized this year and implemented no later than July 1, 2023. Insider previously reported on another set of proposals that the department published to reform the student loan industry – which is currently in a period of public consultation – which included reforms to the Civil Service Loan Forgiveness Program, debt relief for those determined to be totally and permanently disabled, and plans to prevent interest from accumulating on debt, among other things.
Reforms to income-contingent reimbursement (IDR) plans were not included in recent proposals, but an Education Department spokesperson told Insider last week that an IDR proposal would still be published soon and implementation is still scheduled for next year.
These proposed rules also come as Biden moves closer to making a decision on a large student loan forgiveness. He is reportedly considering $10,000 debt forgiveness for borrowers earning less than $150,000, and the relief will likely be announced before student loan repayments resume after Aug. 31.