Proposed changes to federal rules about student loan forgiveness could open up colleges across the country to lawsuits over “misrepresentations” of performance in areas such as graduation rates and job placement, legal experts say.
Watchdog.org recently highlighted a number of local schools whose promotion of such numbers could make them vulnerable to litigation, according to the legal experts the non-profit interviewed.
The purpose of the new rules is to protect student loan borrowers from misleading, deceitful, and predatory practices by colleges, according to the Department of Education. The changes were proposed following the collapse of Corinthian Colleges last year.
The for-profit network of Corinthian campuses was ordered to pay restitution for providing misleading graduate job placement information, as well as promoting degree programs that it didn’t offer, according to the Los Angeles Times.
In response to the flood of cases in which former Corinthian students wished to discharge their federal loans, the department sought to streamline the borrower defense process and improve the government’s ability to hold schools accountable for actions that result in loan discharges.
The new regulations, set to go into effect next year, would establish a much broader definition of misrepresentation that could include innocent mistakes by a university, according to critics.
The schools say they follow national guidelines for calculating and reporting those statistics and are not misleading anyone.
“I personally would feel very confident in our information,” said Wendy Smiseck, director of career services at Wittenberg University.
Data the school publishes on post-graduation job placement rates comes from surveys of recent grads and it’s posted with the caveat that not everyone provides answers, Smiseck said.
University of Dayton officials said they also use a survey that follows protocols set forth by the National Association of Colleges and Employers.
Officials from several other local schools did not return calls by deadline.
It’s a common practice to promote programs with high success rates for graduates, according to Watchdog.org, and that’s why the broad language in the rule could be problematic.
“The worry really is that the rule the Department of Education is writing is so vague that these schools who aren’t doing anything wrong could face lawsuits under these new rules,” said Kevin Glass, one of the authors of the Watchdog.org report.
Dozens of law school graduates have attempted to bring civil suits against their former institutions for over-hyping graduate success rates in recent years, but most have been quickly dismissed. A recent case against the Thomas Jefferson School of Law was rejected by a jury in March.
Thousands of individuals, colleges, and education organizations wrote to the Department of Education during the open comments window this summer, many supporting the overall measure but questioning the broad wording.
In addition to being held financially responsible for discharged loans, the new rules would allow the Education Secretary to suspend or terminate federal student aid programs at an institution.
“(We) understand ED’s desire to regulate false and misleading marketing, but this proposal takes a sledgehammer to the problem. The vastly broadened view of misrepresentation will result in a booming business for lawyers and will tie-up institutions in governmental red tape,” said John Walda, President and CEO of the National Association of College and University Business Officers.
A coalition representing historically black colleges and universities also said a requirement that schools provide financial protection, such as a letter of credit, against litigation could put a particularly large burden on already financially struggling institutions.
“We urge the department to specifically state that any statement or other action that might fall under the scope of the definition of misrepresentation be a willful act, which would exclude inadvertent mistakes that were without intent to mislead,” the coalition’s letter said.
The department did not respond to a list of questions about the draft of its new rules.
Many organizations praised parts of the proposed rule changes, including prohibitions on mandatory pre-dispute arbitration or requirements that students first engage in a school’s internal complaint process before contacting accrediting and government agencies.
While accountability measures to protect students are important, it would be unfortunate to see good schools caught up in litigation over unintentional misinformation, said Sean Creighton, president of the Southwestern Ohio Council for Higher Education.
“It makes sense that individual colleges that intentionally falsify data to convince you to attend their school need to be held accountable, as was the case of Corinthian College,” Creighton said. “Yet, we also know students select a college based on many factors, so I’d be cautious to create a blanket policy for all schools that may result in an unwarranted increase in student lawsuits, years later.”
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