Coalition Continues to Fight Against New Regulation for Backdoor Student Loan Bailout

Michi Iljazi

September 30, 2016

Congress has recessed until after the November elections, but unfortunately federal agencies and the Obama Administration are still making sure to promulgate new rules and regulations aimed at to increasing the authority and scope of the executive branch. Taxpayers continue to pay the price from damaging regulations coming from agencies like the Environmental Protection Agency (EPA), the Federal Communications Commission (FCC), and the Treasury Department. Recently, the Taxpayers Protection Alliance (TPA) joined a coalition effort hoping to stop the “Defense to Repayment Regulations” rule coming from United States Department of Education (US ED). This new rule proclaims to “protect students,” but all it will do is cost taxpayers, as it is a bailout for student loans. The rule could cost anywhere from $2 billion to $43 billion according to the US ED’s own analysis and that is why TPA continues to oppose the rule and call for action to stop it. This week the coalition, led by American Commitment, sent a new coalition letter to Howard Shelanski, the Administrator at the Office of Information and Regulatory Affairs (OIRA) urging the agency to require a new analysis of the rule and its cost before moving forward.

Read the full letter below:

September 28, 2016

Administrator Howard Shelanski
Office of Information and Regulatory Affairs
725 17th Street, NW
Washington, DC 20503

Dear Administrator Shelanski:

We are writing on behalf of taxpayers, millions of whom are members and supporters of our organizations, who will be forced to pay billions of dollars in discharged student loans under the proposed Department of Education (ED) Borrower Defense to Repayment Regulations (BDTR) now under review by the Office of Information and Regulatory Affairs (RIN:  1840-AD19).

The proposed rule would create a stampede to file claims for loan forgiveness based on a newly broadened, vague standard requiring only that a plaintiff allege a school made a “substantial misrepresentation.” This overly broad phrase is defined as a “statement” or “omission” with a “likelihood or tendency to mislead under the circumstances.”

The existing rules were designed to allow students to sue for loan forgiveness when they were victims of intentional fraud or another violation of state law. The proposed standard is so vague that complaints will proliferate based on innocent errors and alleged misunderstandings – with a significant portion of the costs borne by federal taxpayers.

The ED’s own analysis in the proposed rule found “a net budget impact in costs over the 2017-2026 loan cohorts ranging between $1.997 billion in the lowest impact scenario to $42.698 billion in the highest impact scenario.”

This shockingly imprecise estimate suggests the department is incapable of reasonably estimating what the ultimate costs to taxpayers will be – and indeed there is significant risk that the costs could exceed the $43 billion top of their range.

According to the Wall Street Journal, “Credit Suisse analysts warned the proposal would inspire a ‘cottage industry of attorneys poring over advertising’ by colleges, and could force the closure of many small schools.”

“In theory a student could say, ‘I took English 101 and you didn’t teach me Shakespeare and the course description said you’d provide a solid foundation in Western literature,’ ” David Baime of the American Association of Community Colleges told the Journal.

Such an enormous commitment of federal taxpayer dollars should not be made through agency rulemaking without an express directive from Congress, and it certainly should not be made without a far more rigorous analysis and estimate of what the costs to taxpayers will end up being that the Department of Education has conducted to date.

We formally request that a new analysis of the proposed regulation be conducted, independent of the Department of Education, in order to more precisely determine the expected economic impact of this rule, and that finalization and implementation of the regulation be delayed until such an analysis is completed.

We further request a meeting with you or your designee to discuss these concerns.


Melissa Ortiz, Founder, Able Americans
Phil Kerpen, President, American Commitment
Sean Noble, President, American Encore
Brent Gardner, Vice President of Government Affairs, Americans for Prosperity
Grover Norquist, President, Americans for Tax Reform
Tim Lee, Senior Vice President of Legal and Public Affairs, Center for Individual Freedom 
George Landrith, President, Frontiers of Freedom
Andrew Langer, President, Institute for Liberty
Seton Motley, President, Less Government
Brandon Arnold, Executive Vice President, National Taxpayers Union                   
David Williams, President, Taxpayers Protection Alliance
Jenny Beth Martin, Co-Founder, Tea Party Patriots

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