Just How Much Student Debt Do We Really Want To Forgive?

The Department of Education might think that they are talking about for-profit colleges, but they just described American law schools.

DisasterBuzzFeed, to their immense credit, really blew the lid off of a new proposal from the Department of Education that had been a little under the radar. The DoEd wants to “clarify” its “defense to repayment” provision for Federal Direct Loans. They want to make it easier for students who have been mislead into financial ruin by institutions of higher learning — especially by “for-profit” institutions — to get out of their government loan repayments.

Defense to repayment is a rule that exists right now, though few student borrowers know about it. It’s an avenue that allows borrowers to get out from under their student debts if, for instance, their school breaches a contract with a student, or if the student wins a court case against the school over the provided education.

The proposed “clarification” is much more broad than that. The new rule would cover, according to the DoEd website :

A substantial misrepresentation by the school about the nature of the educational program, the nature of financial charges, or the employability of graduates.

The Department of Education might think that they are talking about for-profit colleges, but they just described American law schools. If this proposal goes through, law students across the country could have a claim to get out of their federal debts. Hell, graduate students across the country could have a claim. Go check out a journalism school brochure, circa 2007, if you want to see some “substantial misrepresentations” about your future in print media. Go talk to a fry cook about what she thought her culinary school degree would get her. For-profit institutions do not hold a monopoly on misleading students. “Professional schools” from law to plumbing are in on the “employability” scam.

And lest you believe that the lack of success by law students suing their schools for deceptive practices in court offers some kind of protection to law schools, remember that we’re talking about a rule administered and adjudicated by the Department of Education. Students claiming a defense to repayment do not have to go to court. They have to apply to the DoEd, who will review their evidence and make a call.

But, if court is your thing, the DoEd has something for that ass:

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Recent history demonstrates the need to address bans by postsecondary institutions on both class actions and individual lawsuits by borrowers that prevent them from having their day in court. Some schools have limited students’ ability to sue a school for wrongdoing by requiring students to agree to mandatory, pre-dispute arbitration as part of their enrollment agreements, or as a part of other agreements or documents…

The Department’s proposed regulations include measures to protect students from signing away their ability to sue.

They want to make it easier for students to sue as a class. Basically, if these rules go through, the only law schools that will be protected are the ones that graduate students who are still fully ignorant of the law or their rights.

Is that what we want? Look, I’ve planted my flag on the “law school = bad” side of the debate between reasonable people and law school administrators. But somewhere between the extremes of an InfiLaw diploma mill and brutal honesty is something called “advertising.” Exposing pretty much every graduate institution to claims of “misrepresentation” from students who haven’t been able to find jobs in a challenging market seems overbroad to me.

Of all the things we want to spend our educational tax dollars on, I’m not sure that bailing out the bottom 50% of DeVry Salon of Law and Beauty from their useless degree is our best use.

Kyle McEntee of Law School Transparency isn’t as worried that the new rule will spread to all graduate institutions:

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“I don’t think this is about the degree lacking value in the economic sense, but more about the inducement through deceptive tactics.”

Is this rule narrowly tailored enough to capture the boldly fraudulent schools, while leaving alone the merely incompetent ones? I don’t know.

But I do know the reason law school administrators aren’t screaming about this proposal like they would if somebody threatened to change the tenure process. They really don’t give a damn who the government lets off the hook, as long as they get their money. These rules are backwards looking. They’re trying to ameliorate past offenses without actually fixing the ongoing problem.

Taxpayers shouldn’t have to pay for victims of educational fraud, the schools should have to pay. The schools need to have some skin in the game.

Personally, I find myself getting closer and closer to the generally asshole neocon opinion that the government needs to get out of the business of guaranteeing student loans. At least for graduate schools. Rich schools can loan the money to the students themselves, and if those students default, the school bears some of the risk. Schools that can afford to do that can go to a private bank for the money, and if the bank says, “are you kidding me, I’m not giving your school millions of dollars to dupe a class of students who will never pay it back,” then they suffer the harsh market reality of closing. The state should still support public universities, but the feds need to stop filtering that support through tuition dollars for the number of marks the school matriculates.

Thousands of good students will have their access to higher education severely limited. But thousands will be saved from their own stupidity. And hundreds of schools will have to find another kind of snake oil to sell.

At the very least, that’s an overbroad solution. The Department of Education seems to be offering an overbroad band-aid.

Law School Grads Could Be Next To Have Student Loans Cancelled [BuzzFeed]