Defining Colleges' Liability for Fraud Claims

The U.S. Department of Education will ask the appointed panel charged with overhauling an Obama-era rule to protect student borrowers to reconsider the extent to which colleges and universities should be liable for loan discharge claims based on fraud or misrepresentation.

That question is one of many that the panelists will be asked to grapple with in a process called negotiated rule making, according to a source with knowledge of the discussions. Education Secretary Betsy DeVos announced in June that she would block the student protection regulation, known as borrower defense, from going into effect and would launch a rule-making process to craft a new rule.

DeVos has said the Obama administration’s rule did not sufficiently address the concerns of colleges. For-profit colleges have been among the most vocal critics of the regulation, but higher education groups representing public and nonprofit institutions have also been critical.

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