A new rule proposed by the Biden Department of Education is being used as a vehicle to provide blanket loan forgiveness in a way that will burden American taxpayers who are struggling to recover from the COVID-19 pandemic, rising inflation and a global recession.
The proposed Borrower Defense to Repayment (BDR) rule would expand the scope of this program far beyond its original intent. The BDR rule was originally created with the right intent to protect students from being taken advantage of by their schools.
The expansion would also unfairly burden nontraditional schools widely chosen by students, often from from underserved communities, for their flexible scheduling and approachable online curriculum, and then pass the bill onto taxpayers.
The BDR rule provides an avenue for borrowers of federal student loans who were truly defrauded or who attended schools that violated state or federal laws to have their loans discharged or have the remaining balance of their student loan debt eliminated. Traditionally, the onus was on the student to prove they “were misled or defrauded” by their school to have a successful BDR claim.
However, the proposed change would turbocharge this type of loan forgiveness on the narrowest of grounds. It would lower the burden of proof on the student borrower so far that it essentially guarantees a blank check for forgiveness of government-backed student loans under almost any circumstances. This places an undue tax burden on the millions of Americans who chose not to get a post-secondary education.
There are 45 million student loan borrowers owing approximately $1.7 trillion in student loan debt. The billions needed to offset these numbers will increase inflationary pressures on our economy, unduly burdening consumers and small businesses.
The recent spring and summer loan forgiveness announcements appear to foretell how the Department will handle claims if the rule is formalized. To date, 800,000 people have had their loans forgiven. A majority of the beneficiaries didn’t even apply for the loan forgiveness.
HLF has always supported non-traditional approaches to education, including career-oriented colleges, because they enhance career options and economic empowerment for students pursuing a ‘non-traditional’ route. These institutions provide a vital means of economic and academic empowerment for people who might otherwise be left behind. Statements made by senior officials in the Department of Education suggests that they will focus its regulatory energy solely on what they call “high volume” schools, which points to these non-traditional institutions.
Later this week, HLF will file regulatory comments asking the Department of Education to address these concerns before BDR can be used and abused to cause even more harm.
UPDATE: Our filed comments are here.
