Today the Family Business Coalition filed comments with the Department of Education, opposing proposed changes to the Borrower Defense to Repayment rule.

As an organization that is dedicated to protecting family businesses as America’s economic engine, we are deeply concerned with the Biden Administration’s proposed Borrower’s Defense Rule (BDR) that would provide a pathway for full forgiveness of the roughly 1.6 trillion dollars in direct loan debt held by the US government. American families are already busy contending with record inflation, rising consumer costs and economic uncertainty. They should not be forced to bear the burden of backdoor student loan forgiveness.

BDR is a little-known and rarely used rule meant to protect students who were taken advantage of by an institution of higher education. Under BDR, students can receive relief when the institution they attended commits fraud or is found to be in violation of state laws. As is, BDR is a common sense consumer protection measure that provides relief to victims of fraud.

As we explain in our regulatory comment, the Biden Administration would warp this rule beyond recognition, turning it into a mechanism to confer billions of dollars in student loan relief without Congressional approval. The proposed rule change would remove the requirement that students prove that their institution misled them, and would remove the requirement that students suffered financial harm as a result of their reliance on that misrepresentation. It seems absurd, but under the new proposed standard, a successful graduate of a top institution who has simply decided they have no interest in paying off their loans could claim that a recruiter accidentally misstated the school’s ranking, and that they relied on that misstatement, and could be granted full student loan forgiveness.

This is an insult to the millions of American families who planned and saved to pay for a college education, and it will be a burden on the millions of American taxpayers and business owners who have succeeded despite the lack of a college education. Consider that analysis by the Committee for Responsible Spending of a far more modest plan to forgive 10,000 in student loans for borrowers found that program would cost 230 billion. Meanwhile, recent analysis by the GAO finds that various mechanisms meant to alleviate the cost of student loan debt have transformed a program that was supposed to generate 114 billion in revenue over twenty five years for the Treasury into a program that is expected to cost 197 billion. Changes to the BDR program that would allow almost anyone to file for full forgiveness on almost any grounds would make these numbers look insignificant by comparison; they would almost certainly drive inflation and necessitate significant tax hikes to address revenue shortfalls.

Family businesses must struggle under the burden of paying their own bills. That’s especially true in times like these. The Family Business Council urges the rulemaking committee to go back to the drawing board and develop rules that are focused on protecting students by helping them have confidence they are pursuing a quality education that will open the doors to new opportunities. This guarantee will help these students contribute to a thriving and successful business community that creates jobs and economic growth that benefits us all. The alternative proposed with this new BDR rule will have the opposite impact that undermines student success and is a drag on our economy for years to come.

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