Trump, DeVos stumped on student loans

Court may compel enforcement of Obama rule, as Illinois moves to protect professionals who default on loans

 President Trump’s administration was slapped by a court for failing to implement a new rule on student loans put forth by the Obama administration. (One Illinois/Ted Cox)

President Trump’s administration was slapped by a court for failing to implement a new rule on student loans put forth by the Obama administration. (One Illinois/Ted Cox)

By Ted Cox

President Trump and his Department of Education secretary suffered a setback this week as a court ruled they had illegally attempted not to enforce an Obama administration rule on student loans.

U.S. District Judge Randolph Moss, an Obama appointee, ruled Wednesday in Washington, D.C., that Education Secretary Betsy DeVos had illegally pushed back the effective date for the so-called Borrower Defense rule, protecting students from predatory for-profit colleges.

Illinois was one of 19 states that joined in the suit.

According to Bloomberg News reporters Andrew Harris and Daniel Flatley, the Borrower Defense rule was originally slated to take effect in July 2017 and would have protected students from for-profit colleges issuing what turned out to be bogus degrees. If such a college recruited students by promising its degree would produce a job, only to have employers deny the certification of that degree, any student loans would be forgiven and the college would be on the hook to repay government losses.

The Obama rule challenged “financially risky institutions” to be prepared to cover losses on student loans.

DeVos challenged that Obama regulation and pushed its effective date back a year, then another year to next July.

Moss ruled there was no valid reason to delay implementation for the benefit of students, stating in his opinion: “The relief they seek in this action — immediate implementation of the Borrower Defense regulations — would restore those benefits.” He set a Friday court date for a hearing on whether he would compel implementation.

Trump, of course, agreed to what turned out to be a $25 million settlement for students of his own Trump University realty seminar program shortly after the 2016 election, when the case was slated to go to court. Former students had charged that the school’s business claims and “hand-picked” faculty were trumped up. Trump attorneys did not admit to fraud, but the $25 million settlement repaid students an estimated 80 to 90 percent of what they paid: typically $,1500 for a three-day seminar, or $35,000 for an in-depth mentorship program, according to Politico.

Student loans have grown exponentially as the cost of higher education has increased, and Illinois just moved to protect professionals who nonetheless have to default on their loans.

It is counterproductive and counterintuitive to take away someone’s capability to work because they are unable to pay bills. Obviously, if you cannot work you will not be able to pay your loans and will collect more debt. That cycle doesn’t benefit anybody.
— State Sen. Tom Cullerton

A new law sponsored by state Sen. Tom Cullerton of Villa Park was signed into law by Gov. Rauner last month protecting professionals who’ve defaulted on their student loans. The law forbids state licensing boards from stripping anyone of a professional license simply for defaulting on student loans. That includes denying or suspending a license in 37 professions such as occupational therapists, barbers, teachers, structural engineers, home inspectors, and real-estate agents.

“It is counterproductive and counterintuitive to take away someone’s capability to work because they are unable to pay bills,” Cullerton said. “Obviously, if you cannot work you will not be able to pay your loans and will collect more debt. That cycle doesn’t benefit anybody.”

It’s worth noting that student loans are typically not diminished in bankruptcy.

The common-sense bill had bipartisan support. Its sponsors in the House included state Reps. Tony McCombie of Savanna and Will Guzzardi of Chicago. Rauner signed it last month without fanfare.