by Gerard Scimeca
Most Americans have been conditioned to accept some level of incompetence and inefficiency from government – but not to the extent that federal employees paid by our tax dollars simply admit that they are fundamentally incapable of doing their jobs. Yet shockingly, this is what we are now witnessing with the Department of Education’s failed and convoluted attempt to process claims for student loan cancellation.
In June, the DOE discharged $5.8 billion in federal student loans owed by more than 560,000 borrowers who attended campuses operated by Corinthian Colleges. The announcement was spun by some as a victory for students, but in fact it reflected the DOE’s embarrassing incompetence in adjudicating claims alleging fraud in the procurement of student loans. The department simply rubber-stamped over half a million applications en masse to clean out its “to do” box. As a result, a federal judge forced the DOE to settle thousands of cases it had not previously processed. Since the June announcement, more than 60,000 additional loan requests have been filed, and the floodgates remain open for another 30 months.
Where else in government would this level of willful incompetence be tolerated? If the Department of Motor Vehicles feels overworked, could it simply default to issuing a driver’s license to anybody who walks in? Can an overworked health inspector just stop inspecting restaurants and inform diners that they’re on their own? Could the Transportation Security Administration announce that it is not equipped to scan the long lines at airports and simply wave passengers onto airplanes?
The vehicle that the Biden administration is using to cause so much disruption without any congressional oversight is the Borrower Defense to Repayment program, established years ago as a benign, precautionary regulation to backstop the federal student loan program. In the first twenty years of its existence, only five students applied for loan forgiveness under BDR. But with the DOE now run by student loan activists, a new proposed BDR rule is set to turn on the debt-forgiveness spigots, at a significant cost to American taxpayers – 80 percent of whom have no student loan debt.
Consumer Action for a Strong Economy warned last November that President Biden would expand BDR in order to forgive billions in college debt, even when such claims for debt cancellation were based on flimsy or nonexistent premises. A few months later, the DOE announced that it would forgive $72 million in debt for approximately 1,800 students at DeVry University.
The proposed new BDR rule would expand the scope of students eligible to file claims to include anyone who can muster an accusation of being “misled” on the narrowest of pretenses. Students won’t have to prove bad intent of their institutions or even harm. Incredibly, this means that an executive with an Ivy League degree and seven-figure salary is just as eligible to have his loans expunged as a student legitimately defrauded in pursuit of a degree. The DOE even supports processing group claims of thousands of students at a time, an idea ditched by the Trump administration, which insisted that every individual claim be subject to credible review.
The Department of Education’s inability to adjudicate claims efficiently resulted in a judicial rebuke, a clear pronouncement of an incompetent department not up to its task. With the DOE already overwhelmed with applicants, the new BDR rule would make things substantially worse, cementing the DOE’s assertion that it doesn’t have the means to process individual claims – and leading to student loan forgiveness on a mammoth scale.
The vagueness of the proposed rules regarding what constitutes “fraud” won’t make that burden any easier. It includes deliberately vague language such as “aggressive advertising,” which can easily be asserted in the absence of actual fraud. Vague definitions by design allow the DOE to act arbitrarily and capriciously and further empower the Secretary of Education to use his enforcement powers to pick winners and losers among higher education institutions. This is particularly concerning during a time when BDR is already being weaponized to target non-traditional, career-oriented schools.
It’s important that the DOE process actual cases of fraud to protect student borrowers, but the proposed BDR rule is a transparent political weapon intended to result in mass student loan forgiveness at a time when Congress and the American people oppose such a reckless handout. Congressional leaders must step in, not only to shine a light on this massive, unapproved debt-forgiveness scheme, but also to exert their authority to slow the abuse of a rule designed to protect students. If the DOE is left unchecked, it will unleash an avalanche of baseless debt-forgiveness claims that will burden Americans with billions more in red ink we cannot afford.
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Gerard Scimeca is the Chairman of Consumer Action for a Strong Economy (CASE).
Photo “Man Paying Taxes” by Mikhail Nilov.