Before getting too excited about the possibility of student loan debt forgiveness, one ought to examine the Department of Education’s 530-page draft regulation, which was highlighted by Max Eden for U.S. News & World Report.
If former students with debt feel that their school made a “substantial misrepresentation” to its students, defined as a statement or omission with a “likelihood or tendency to mislead under the circumstances,” they can apply for loan forgiveness. A hearing examiner of the department, whose bureaucracy has already been criticized for a whole host of reasons including handling of sexual assault cases and Title IX exemptions, would have sole discretion.
The department is focusing on for-profit colleges, including Corinthian Colleges, which was found guilty, by a judge, of fraud. As a result, students petitioned for loan forgiveness options, which Eden said is “under an obscure provision known as ‘defense to repayment.'” However, the department’s regulations could affect non-profit colleges as well, depending on interpretation.
Eden used the example of Arizona Law School, which advertised its 2.8 percent unemployment rate, and differentiated that from its 9.7 non-employed rate (which includes those not seeking work).
The new regulations also lift the three-year statute of limitations for bringing claims, so many more could emerge, costing between $199 million and $4.23 billion a year, or even more. And the taxpayers could be the ones who suffer, especially under Hillary Clinton’s proposed tax plan.
To make matters worse, there are “triggers” — and not the kind hypersensitive students complain about. Colleges could be “triggered” for various issues, including borrowing claims, investigation by a government entity, or a lawsuit from a private party, requiring them to obtaining a letter of credit to cover loan forgiveness claims.
Perhaps this is the trigger warning colleges should pay attention to.
