The Department of Education has proposed a regulation which would quickly lead to a massive, multi-billion dollar default on millions of student loan balances. The tab for this massive bailout will be passed along to middle class families struggling to stay above water as it is. The bailout itself will be administered by a government agency which even Uncle Sam has said is not capable of such an undertaking.There's more:
The mechanism for this taxpayer bailout of Millennials is an expansion of the department’s “Borrower Defense to Repayment” program. This fairly reasonable escape hatch allows student loan borrowers who were the victims of fraud or significant misrepresentation by their school to apply to get out of repayment. This program, which has been around for over twenty years, is intended as a limited consumer protection against really bad actors and fly by night diploma mills.
Never one to let a crisis go to waste, the Obama administration wants to use their aggressive regulatory overreach to massively expand this program and saddle taxpayers with the bill. Under their proposed rule, a borrower could try to get out from under his student loan merely by saying that his college “ substantially misrepresented” facts to him in some way.
Civil liberty and privacy concerns have also dogged the department, as GAO reports that there were no fewer than 1470 “information security incidents” (that is, data breaches) at the Department of Education between 2009 and 2014, with most of those coming in the latter two years. Identity theft has cropped up as a huge concern for tax filers in the past two tax seasons (as a result of data breaches in Obamacare exchange insurance plans). It’s entirely possible and likely that a data breach-prone Education Department could trigger another tax filing season of 1040s filed by criminals stealing “quickie refunds” from the IRS and ultimately from taxpayers.The sovietization of America's higher education industry.
Needless to say, the Department of Education is not well-equipped to handle this proposed bailout, adding insult to taxpayer injury.
According to the Federal Reserve, 43 million Americans owe $1.26 trillion in student loan debt. Annual new graduates numbering about 1.3 million have about $37,000 in debt on average. It’s these borrowers most likely to want to get forgiveness. Imagine a world where many of the 1.3 million annual new graduates apply for this taxpayer bailout every year. It would be a bureaucratic goat rodeo. There is no way the Department of Education could keep up with the demand, resulting in massive data leaks. No doubt, many more borrowers than are eligible would get approved in all the chaos, pegging the taxpayer exposure to the write offs at a maximum.