Earlier this year the Obama Administration made moves regarding student loan relief regulations for students attending for-profit colleges.  The proposal aimed to loosen regulations on student loan forgiveness in the case of a student being victimized by a for-profit college; this type of victimization included misleading job placement statistics and other false advertising.  While these new regulation standards are meant to help victimized borrowers, the repercussions and burden on tax payers may outweigh the altruistic aims of these new regulations.

There are several aspects of these new regulations that may cause severe problems for colleges and tax payers, and they both have to do with cost and legal issues.

Starting with cost, the estimated expense over ten years for tax payers amounts to anywhere between “$1.997 billion in the lowest impact scenario to $42.698 billion in the highest impact scenario” according to Phil Kerpen.  This wide range says one thing: there is no realistic cost estimate for this plan; in fact, it is not unrealistic to bet that this plan costs more than $43 billion over ten years.

Given the lack of specific cost estimates, these loosened regulations clearly do not have sound and accurate logistical backing.  Overall, this plan receives a good deal of flak for seemingly catalyzing an already fiscally volatile issue.  While taxpayers should be weary of the future, colleges have been gearing up for the potential onslaught of legal issues, as well.

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A key criticism of these new regulations from the Obama Administration is its lack of detail.  These new regulations are much looser than before.  They allow any borrower to file a claim against a college for any reason involving potential misdirection or victimization.  In a way, this opens up Pandora’s box when it comes to legal action by both colleges and borrowers.

Student borrowers can target their colleges for a number of reasons under the guise of “false advertising” with the hopes of eliminating their debt obligations.  In the end, these regulations may end up creating a system that is taken advantage of unfairly.  This has colleges worried enough because several of them are starting to set aside funds specifically for legal proceedings and reimbursements in the future.

While it must be said that colleges with fraudulent advertising exist, many colleges do not actively attempt to mislead their students, but misleading or false advertising can be broadly defined to include a number of scenarios in addition to false job placement statistics.  With this in mind, many colleges may fall victim to unfair costs from these new regulations.

At any rate, these new regulations are to be implemented later this year.  It remains to be seen whether the cost of numerous lawsuits has a significant impact on the current student loan situation.  Some experts warn that this may be “the most expensive proposed regulation of the year.”