HIGHER EDUCATION BUBBLE UPDATE: If traditional colleges think this won’t affect them, they’re crazy. Obama administration plans to overhaul rules on student debt forgiveness.

The Obama administration said Wednesday it will overhaul the loan forgiveness process for students who believe they have been defrauded by their colleges, in light of the collapse of controversial for-profit Corinthian Colleges.

Students can apply to have their federal loans discharged if they can prove a school used illegal or deceptive tactics in violation of state law to persuade them to borrow money for college. But critics say the process, known as a “defense to repayment claim,” is complicated and difficult to navigate. And the demise of Corinthian, with thousands of former students muddling their way through the claims process, has shown that the system needs fixing.

Starting next month, the Education Department will begin holding field hearings and convene an advisory panel to develop regulations to streamline the loan forgiveness process. The department also wants to strengthen provisions to hold colleges accountable for the discharged loans, limiting the cost to taxpayers.

All is proceeding as I have foreseen.