There has been a call for new regulations by the Obama administration for student loans.
A report made by the Washington Free Beacon states the Department of Education is estimating these rules could cost over $43 billion.
Below shows the possible range of costs over the next 10 years:
The Hill has stated that Universities are also at risk of facing lawsuits.
It is said that they this is due to the rule in the new set of regulations that is lowering the threshold for filing lawsuits to any misrepresentation that takes place.
A Hill report stated that John King, Jr, the Secretary of Education, said that any student that has been defrauded by a university deserves a fair and efficient way to be able and obtain the relief they deserve.
Student advocates pushed the regulation due to for-profit colleges and universities continuously misrepresenting themselves to students to enhance enrollment rates.
This law can impact some of the finest non-profit schools in the nation as well.
The Rule
The Argument Against
Phil Kerpen, the president of American Commitment, is against the proposal.
He said that the nation has accumulated over one trillion dollars’ worth of student debt.
He says that with the new rule anyone that obtains an education, and their career did not turn out exactly how they thought it would, think up a reason to sue.
He states that anyone can find a way that a university either reported or failed to report facts with the intention of misleading the student and leading them toward a dead end path.
He further said that lawmakers have no knowledge of how much these new regulations are going to cost.
He stated that the bureaucrats had proposed a rule that is going to cost $2 billion dollars at a minimum.
Kerpen further said that there is a massive possibility taxpayers will be faced with paying more than $40 billion dollars more than what they already have to pay.
Leading international bank, Credit Suisse, has warned that this regulation could cause an industry of lawyers going through the advertising that colleges release.
University associations are not just standing idly by, however.
They are getting ready for the possible lawsuits of individuals that want to free themselves of their accumulated student debt.
The Costs
Taxpayers could initially be the ones that have to pay for the numerous lawsuits universities are going to face as a result of this new student loan law.
The regulation is lowering the threshold for legal action that can be taken against any misrepresentation given off by a college.
Taxpayers could have to pay for this because the federal government finances the $1.2 trillion dollars worth of student debt.
Below shows the distribution of Student Loan Debt balance in the U.S. as of 2012 Q4:
Which Colleges Could Face Legal Action
How do Colleges Omit or Mislead?
Glass stated that numerous universities claim that their graduates have extremely high rates for job placements.
Colleges continuously count individuals that have gone on to receive higher education as being placed in jobs or do not put them anywhere in their statistics.
Sometimes, colleges do not disclose the types of degrees that helped these individuals get their employment in the first place, and claim credit for the student being put in the field.
How is Proof Found?
American Association of Community Colleges employee David Baime disclosed to the Wall Street Journal that attorneys could easily find reasons for taking legal action by looking through the advertising posted by colleges.
Baime stated that, in theory, a student could argue that their English class didn’t teach them Shakespeare and the course description could have indicated that they would build a sound basis on which to capitalize in the field of Western Literature.
How is it Being Fought?
Kerpen has called out to Congress asking them to debate any loan forgiveness type program.
He stated that this should not be activated using any regulatory decree.
He further said that student debt is an issue both politically and fiscally.
To get a clear picture of what the colleges are facing, they will have to relieve the students of their student loan debt.
If a student used student loans to fund their entire college experience, this could become costly quickly.
Take a look at the following tuition and fee costs for the 2015-2016 school year.
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