After You Paid the Tab, Obama Wants to Stick You With the Tab

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Just when you thought President Obama was going to go gently into an end-of-second term good night, he wants to stick another item on the tab. Actually, it'll be your tab.

If he gets his way, then taxpayers could be on the hook for an additional $43 billion. That's a sum that even this spendthrift government says is "significant."

Here's what you need to know:

The Department of Education (DOE) wants to allow current and former students to sue their school or college even if there is no evidence of intent to defraud or mislead.

It's a provision that goes way beyond current protections.

Bad economics

The DOE admits the cost of this will be huge, at up to $43 billion over the next ten years. The Office of Management and Budget describes that figure as "economically significant," a term that means bad news for an already sluggish economy.

But as we all know, this administration doesn't exactly have a good record when estimating costs. Just look at ObamaCare as a case study in failed forecasting, which vastly underestimated costs. So expect the true price tag for the DOE proposal to grow bigger, if its pushed forward.

The key language in the DOE proposal is that the school or college doesn't have to have any intent to misrepresent, as you would normally expect in a fraud case, which would require proving willful desire to deceive by the accused.

Instead, all that would need to happen is for a school to make "substantial misrepresentation." This overly broad phrase is defined as a "statement" or "omission" with a "likelihood or tendency to mislead under the circumstances."

Fat fingers

That means, theoretically at least, a simple data entry mistake when reporting employment figures, or other statistics, could land an institution in costly hot water. In other words, a fat finger by a junior employee could turn an otherwise superbly run institution into a ‘fraudulent' one, or at least one that is on the hook financially.

There is a lot hidden in the proposal but some of the key items are as follows. Students would be allowed to seek loan forgiveness if they win a legal case against a school or if the school doesn't meet its obligations to a student borrower. That's just the warm up.

Federal loans

It becomes really hazardous to taxpayer wealth with the "substantial misrepresentation" provision. Even if the school didn't do anything to willfully to deceive people, the student may still be able to default on their debt, thus most likely shifting the loan liability back to the government. That's because close to 90% of the $1+ trillion student loan debt outstanding is held by the government, according to the Huffington Post.

States

The student loan provision is just part of the problem. Although the proposal covers all types of higher education, taxpayer-supported public colleges warrant a special shout out.

For example, a state university would have to fight litigation based on the new proposal at taxpayer expense. That's sure to hurt smaller and poorer institutions disproportionately.

Higher education is already the third biggest budget item for states after K-12 schooling and Medicaid. So expect state tax rates to increase or state-funded colleges to be "streamlined," or worse still, shut.

Legal Mess

It gets worse. The proposal says that there will be no statute of limitations. Again in theory at least, a plaintiff could bring legal cases decades after attending a college. Around 40% of 25-64 year-olds living in the U.S. have at least a two-year degree, so that's a lot of potential plaintiffs.

Given how fleeting the attention span has become it's also difficult to see how anyone could realistically remember what happened at college 30 years ago.

Such cases won't go to court. Doing so would make sense because the U.S. legal system has a long history of adjudicating claims of this type. It's one that many other countries desire to emulate.

Instead, the Department of Education will adjudicate, and the colleges themselves won't necessarily be able to defend themselves against spurious claims. This effectively gives the DOE the power to financially ruin an institution.

Hopefully, sense will prevail.

 

Tony Sayegh is a Fox News Contributor, National Political Correspondent for Talk Media News, and a Republican Campaign strategist.  

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