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Reps. DeLauro, Takano Call on Department of Education to More Stringently Collect Debts owed by Predatory Schools

October 7, 2021

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Reps. DeLauro, Takano Call on Department of Education to More Stringently Collect Debts owed by Predatory Schools
Letters echo findings from Student Defense’s The Missing Billion report

 Congressional leaders are increasing pressure on the Department of Education to ramp up collection and enforcement efforts against predatory colleges. In an October 4 letter, Congresswoman Rosa DeLauro — Chair of the House Committee on Appropriations — issued recommendations the Department should consider to deter predatory colleges from exploiting students. Her letter followed a September 29 letter from Congressman Mark Takano, who urged the Department to shift its collection efforts from student borrowers towards colleges with, in some cases, hundreds of millions of dollars in outstanding debts owed to the Department.

“I appreciate that the Department recognizes how the recoupment process from institutions should serve as a strong deterrent to predatory for-profit colleges,” Rep. DeLauro’s letter states. But she criticized the Department’s recent rulemaking proposal on these collections, saying their recommendations “could render the recovery process toothless and fail to establish a strong deterrent effect that protects student borrowers.”

In a recent report, The Mission Billion, Student Defense found that colleges collectively owe the Department more than $1 billion from legal violations and loan discharges resulting from abrupt closures and fraud. The report highlighted the disparate treatment for-profit colleges and executives face compared to borrowers who seek to have their student debt discharged in bankruptcy. Student Defense found the Department continues to actively oppose individuals seeking bankruptcy-related loan discharges while ignoring outstanding obligations owed by predatory companies.

Rep. Takano cited The Missing Billion in his letter, underscoring his request for the Department to immediately begin collecting these outstanding debts. “These institutions, [the] majority of which are for-profit, currently owe the Department this staggering amount due to misconduct and fraud,” Rep. Takano wrote. “While the federal government has made great strides in assisting students who were defrauded by bad actors, it has yet to direct equal attention towards seeking repayment from such institutions.”

Both letters come on the heels of a recent Government Accountability Office report that highlights the Department’s failure to adequately discharge debt for students who were defrauded by now-shuttered for-profit colleges. The GAO found only a fraction of eligible borrowers have been granted the relief they’re clearly entitled to under current law, further demonstrating the Department’s failure to relieve eligible students’ debt while for-profits continue to evade their outstanding obligations

“We appreciate Chairwoman DeLauro and Rep. Takano’s efforts to bring about desperately needed change in how the Department of Education pursues its debts,” said Student Defense Vice President & Chief Counsel Dan Zibel. “Struggling student loan borrowers shouldn’t have to fight tooth and nail for relief while higher ed profiteers walk away with the fruits of their misdeeds.”

A full copy of the letters and The Missing Billion can be found on the Student Defense website. In October 2020, Student Defense released a paper, Protection and the Unseen: Holding Executives Personally Liable under the Higher Education Act, supported by Sen. Elizabeth Warren, which detailed the Department’s existing statutory authorities to hold the owners and executives of colleges personally accountable for taxpayer losses.