The Obama administration’s new regulation on student loans could cost taxpayers more than the Department of Education’s estimate of $43 billion, according to experts.
The administration’s proposed rule would ease the loan relief process for student borrowers, allowing anybody who claims to have been victimized by a university’s “substantial misrepresentation” to sue that institution.
Taxpayers could be on the hook for the flood of lawsuits that universities will face now that the threshold for legal action has been lowered from intentional deception to any type of misrepresentation, given the fact that $1.2 trillion in student debt is financed by the federal government.
The Department of Education estimates that the rule change could cost anywhere between $1.997 billion and $42.698 billion over 10 years, a wide range that economic experts say proves how little is known about what universities will face once the regulation is finalized this fall.
“Bureaucrats are proposing a rule that imposes costs—they think—of at least $2 billion and quite possibly $40 billion or more on taxpayers,” said Phil Kerpen, president of American Commitment, an economic policy institute. “What kind of insane range is that? They clearly have no clue how much this will cost.”
Kerpen said the regulation “could easily cost more than $43 billion.”
“We’re sitting on over a trillion in student debt, and under this rule anybody whose career didn’t turn out as planned could come up with a ‘statement or omission with a tendency to mislead,’” he said.
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