Tag Archives: Higher Education

college

New Department Of Education Rules Threaten Colleges

The Obama administration’s Department of Education recently proposed new rules to enable more students to sue universities that defrauded them. While the government should punish blatantly deceptive institutions, these proposed rules promise to penalize many high-quality colleges.

The rules will enable students of a university to sue and recoup their tuition if the university offered a “substantial misrepresentation” of elements like the employability of its graduates or the nature of its educational programs. This is a lower standard than mens rea, the legal principle in fraud cases that a crime requires intent. Troublingly, students can successfully sue whether or not the college intended to lie, meaning that universities will be subject to lawsuits over clerical errors.

This could be crippling. My alma mater, the University of Colorado at Boulder, brings in almost one-third of its revenue from tuition. If just one class of 5,000+ students were reimbursed for their tuition, the university with a substantial shortfall. This could mean cuts to valuable services. Because the University of Colorado is a public institution, taxpayers could also be called upon to make up the difference.

Continue reading at The Daily Caller.

Debt

Young Voices Podcast – Student Debt Relief could leave Universities and Taxpayers on the hook

Today’s Young Voices Podcast features Sergio Monreal and YV Advocate Stephanie Downey discussing federal plans to alleviate student debt by allowing students to sue institutions if they feel they’ve been mislead by the institution, regarding job placement, average salary, etc.

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Costly loan forgiveness amendment will burden universities

The Department of Education is pushing a loan forgiveness amendment to federal student loan policy that would relieve students of their debt if they could make the case that the school “substantially misrepresented” the education received. This new policy would have vast financial implications, is poorly thought-out, and is unlikely to be adjudicated properly.

Under the current policy, there are two main situations in which a student can apply for loan forgiveness: when the borrower succeeds in legal action against the school or when the school fails to meet contractual obligations.

This policy change would add a third component, stating that when the school makes substantial misrepresentations toward the borrower, the borrower can be eligible for loan forgiveness.

At first glance, this amendment looks as though it is protecting the small guy against big, powerful universities. However, the wording of this amendment, “substantial misrepresentation,” goes well beyond the legal definitions of fraud, making it easier for borrowers to make expansive and unreasonable claims. “Substantial misrepresentation,” as defined here, could take the form of a university advertising salary expectations or job prospects which the borrower did not find themselves able to achieve. Or, it could mean the university providing a school ranking institution with any flawed or misleading statistics — a common practice.

While universities should provide honest and detailed statistics to college ranking outlets, the famed U.S. News and World Report rankings are well-known to be fraught with problems; metrics are played around with every year, changed in small ways. Universities must report their acceptance rates, so some have been known to artificially inflate their applicant pool numbers.

A large element of the ranking is subjective, based on reputation or intangible factors like faculty dedication to teaching. It should be no surprise that rankings are far from a precise science. Yet with this new Department of Education ruling, these flimsy metrics could be used to dole out costly loan forgiveness. This amendment is unlikely to bring about greater accountability in college advertising and ranking reporting. Rather, it will simply create an avenue for individuals to drag universities through mountains of paperwork in attempts to get vengeful claims. According to the proposed rule, these claims could cost taxpayers anywhere between $2 and $42 billion.

Continue reading at the Richmond Times-Dispatch.

Amy C. Edmondson

Proposed student loan forgiveness rule would leave universities, taxpayers on the hook for billions

In response to pressure from the Obama administration, the Department of Education proposed an amendment to the regulation governing debt relief for federal student loans. The proposed amendment could have a severe economic impact, with the Department of Education estimating that the new regulation could cost taxpayers up to $43 billion over the next 10 years.

The current regulation was introduced to protect students from being victimized by colleges or universities. The regulation provided borrowers who had been deceived by schools an opportunity to avoid repaying their student loans. In its amended form, however, the regulation’s language is so vague that there is a real danger of it being interpreted too broadly, leaving colleges and universities vulnerable to meritless claims.

The proposed rule would make schools responsible for repaying the loans of their students if the institution is found to have 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.”

In contrast, the legal definition of fraud is narrow. Fraud exists when a person with the “intent to deceive” causes financial harm.  The new rule extends far beyond that.

The proposed rule’s substantial misrepresentation provision does not require intentional misconduct by the school. This omission could cause academic institutions to face claims brought by former students who feel entitled to certain job prospects or salary expectations. If, for example, a statistic such as the average salary of alumni is skewed by an outlier, the school may be liable for students’ loans.

Continue reading at The Hill.

college-graduate-elite-daily

College Isn’t A Guarantee To The Middle Class

Politicians and commentators love to talk up the notion of a bachelor’s degree as a surefire pathway to the middle class. Statistics show that four-year college graduates earn 68% more than people with only a high school degree. This has led politicians to funnel enormous subsidies into higher education, and for some on the left to go further and call for college to be free entirely.

But a surface interpretation of these numbers violates the number one rule of statistics: correlation does not imply causation. On the contrary, those who choose to go to college in the first place could be (and are) quite different from those who do not. Differences between people may drive part of the premium in earnings for college graduates, rather than the degree itself. An examination of the true value of college must take account of these differences.

There are good reasons to think that college’s true value is much less than what is implied by surface-level numbers. Family income, for instance, affects a child’s future earnings. If college graduates come from disproportionately high-income backgrounds, their average income will be higher—but a good portion of this may be due to background, not college.

Some factors that potentially affect earnings, such as race, family background and school district, are easy to control for. But including such easily measurable attributes only tells part of the story. “Unobservable” factors such as motivation, cognitive ability and social capital all plausibly affect earnings—but may also affect whether a young person decides to attend college.

Read the full article at Forbes.