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Jordan Candler / Nov. 2, 2016

The Great Student Loan Heist

The DOE's latest power play will inevitably lead to even broader centralization.

Another week, another instance of the Obama administration — more specifically the Department of Education — circumventing Congress to enact an agenda. The latest example pertains to higher education and the rules surrounding the repaying of student loans. National Review’s Preston Cooper summarizes the problem:

This week, the Obama administration issued a finalized regulation that will allow the Department of Education (DOE) to cancel the debt of students who claim that their colleges have made a “substantial misrepresentation,” such as false or misleading statistics on promotional materials. The DOE can then recover any forgiven balance from the colleges themselves — a major, possibly fatal, financial burden for institutions.

Cooper calls this “another installment in a long saga of government officials using student-aid programs to wield influence over American higher education. Whoever writes the checks makes the rule, and the DOE uses its power to advance an agenda far beyond merely ensuring that taxpayers’ money is put to good use.” An example of how things could go haywire:

For instance, Arizona Law School advertises that its graduates’ unemployment rate is 2.8 percent. As my Manhattan Institute colleague Max Eden pointed out in US News & World Report in August, the share of Arizona Law graduates without jobs — when you include those not looking for work — is actually 9.7 percent. Reasonable people would conclude that Arizona Law is nonetheless well within its rights to advertise the 2.8 percent figure, since by definition unemployed people must be looking for work. But the Department of Education could easily cite this “misrepresentation” as an excuse to punish Arizona Law and cancel the debt of students. Further, in deciding which “misrepresentation” claims pass muster, the DOE opens the door to selective enforcement and raises the specter of witch hunts against colleges that fall out of political favor.

As we’ve previously written, the larger problem is guaranteed access to federal money for education, which puts taxpayers on the hook. Guaranteed access means every education entity public or private is going to do whatever’s necessary to get a slice of the pie. Nowhere does the Constitution enumerate such a federal power or individual right to the fruits of someone else’s labor. Americans now owe $1.3 trillion in student debt, of which $1 trillion is held by the federal government. The DOE’s latest power play will inevitably lead to even broader centralization.

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