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How the Department of Education Uses Student Loans as a Weapon

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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. The rule, known as the “defense to repayment” rule because it allows borrowers to defend themselves against repaying their student loans, is 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. During the 2015–16 academic year, the DOE disbursed $28 billion worth of Pell Grants and $95 billion worth of student loans. All of the DOE’s “Title IV” programs represent nearly 1 percent of GDP in taxpayer-funded largesse for our higher education system. Many colleges and universities would not be able to survive without these federal funds: nine in ten for-profit colleges get more than half their revenues from Title IV programs. – READ MORE

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