Veto Override on Student Loan Forgiveness Rule (H.J.Res.76)

Under the Constitution, a two-thirds majority of those present and voting in both the House and the Senate is required to override a presidential veto. The House will consider the measure first since the bill originated there. 

SUMMARY: The vetoed resolution disapproves the rule issued by the Education Department on Sept. 23, 2019, regarding "borrower defense" to student loan repayment, under which students with federal student loans may have a portion of those loans forgiven if they were defrauded by their college or university. The measure provides that the rule will have no force or effect.

COMMENTARY: The measure was sent to the president last week and had not been vetoed as of press time Friday but was expected to be vetoed soon.

    When the resolution of disapproval was considered by the House and Senate, the White House threatened to veto it, saying it "would undermine the administration's effort to protect students and taxpayers ... [and] would restore the partisan regulatory regime of the previous administration, which sacrificed the interests of taxpayers, students and schools in pursuit of narrow, ideological objectives."

BACKGROUND: The measure was sent to the president last week and had not been vetoed as of press time Friday — but was expected to be vetoed soon given White House threats to veto the measure when it was being considered by Congress. The House on Friday agreed by unanimous consent to consider the veto message on Thursday, May 28.

    The House passed the measure on Jan. 16 by a 231-180 vote under procedures set by the Congressional Review Act, with the Senate passing it under CRA procedures on March 11 by a 53-42 vote.

Borrower Defense Rule

     Enacted in 1995, the borrower defense to repayment law allows borrowers of federal student loans to seek loan forgiveness if an institution of higher education misled them or engaged in other illegal practices.

    Until 2015, this type of loan forgiveness had been used only a few times. But its use exploded after the Obama administration dramatically increased oversight and accountability of for-profit colleges — which were frequently recruiting and enrolling students, supported by federal student loans, with promises that their education there would lead to future jobs. Often, however, those colleges provided a degree or certificate with little value while leaving the student saddled with large student loan debt. (Students at for-profit colleges at the time represented about 11% of the population of all higher education students, but 44% of defaults of federal student loans.)

    In response, the Obama administration sought to update the Education Department's regulations that govern such debt forgiveness, including by establishing a federal standard for determining fraud or misrepresentation by colleges. Previously, borrower defense claims were based primarily on violations of state law. Among its provisions, the Obama rule automatically forgave the federal loans of students whose colleges had closed, it sought to make the schools financially responsible for the loans, and it banned schools from using mandatory arbitration in settling claims. It applied these rules to all colleges and institutions of higher education that are eligible for federal student aid, not just for-profit colleges.

New Debt Forgiveness Rule

    Upon becoming secretary of Education under the new Trump administration in February 2017, Betsy DeVos announced her intention to rewrite the Obama administration borrower defense rules, saying the Obama rules provided "blanket" relief without a full review of the facts and evidence for individual cases. She also argued that students at such colleges, even those whose schools had closed, had gained something from their educational experience and should therefore not expect to have 100% of their student loans forgiven.

    In September 2019 the Education Department issued new borrower defense regulations to govern debt forgiveness. Among the changes, it presumes that borrowers are not entitled to 100% cancellation of their federal student loan debt; provides for each case to be considered individually, even if there is evidence of widespread misconduct at an institution or the school closes; and requires borrowers to show how they experienced financial harm from knowing misconduct by their schools, including by demonstrating that they had actively sought employment in their field — and not just that they were deceived by their college. Students must seek relief within three years of their date of graduation or the date they withdrew from a program (thereby aligning with current three-year record-retention requirements for colleges). The rules also allow for mandatory arbitration agreements (which had been prohibited by the Obama rules).

    The department's new rules are scheduled to go into effect July 1, 2020, and would apply to federal student loans disbursed on or after that date. Loans disbursed from July 1, 2017, until July 1, 2020, would remain subject to the Obama administration's 2016 rule, while loans disbursed before July 1, 2017, would be subject to pre-2016 standards — thereby blocking students of Corinthian Colleges Inc., and other for-profit schools that had closed in that period from using the Obama administration standards.