Last week, the Department of Education announced the final sale of 53 Corinthian campuses to ECMC. In its announcement, however, there is no mention of any debt relief for former and most current students. By failing to provide broad debt relief for Corinthian students, this Administration is continuing the Department’s decades long practice of relentlessly pursuing borrowers, even when there is voluminous evidence that unscrupulous school operators engaged in widespread illegal recruitment practices.
The Department clearly has the legal authority to provide comprehensive debt relief. In 1991, a U.S. Senate Subcommittee issued a report finding that “hundreds of thousands of young people [had been] [v]ictimized by . . . fraudulent schools” because of the Department’s “neglect in carrying out its regulatory oversight functions . . .” and “abdicat[ion] [of] its responsibility to the students.” Based on this report, Congress mandated that the Department cancel the loans of students who attended schools that closed or engaged in certain illegal practices. Since that time, Congress expanded the Department’s authority to provide debt relief by allowing it to determine when a borrower may assert a school’s “acts or omissions” as a defense to repayment.
Now, over 20 years after the 1991 report, the Department continues to neglect its duty to protect students. The Department’s own evidence and the investigations of other federal agencies and over 20 state attorneys general demonstrate that thousands of former students were subjected to Corinthian’s illegal sales techniques and inflated placement rates. Although it should have taken action long before it did, the Department has gone out of its way to keep Corinthian afloat and prevent students from obtaining closed school discharges. The Department even proposes to share in the future profits generated by ECMC, while refusing to provide comprehensive debt relief.
This is not just about Corinthian. This is also about the thousands of students at a wide range of government-supervised schools who have been cheated by for-profit schools over the past 30 years. In 2013, the New York Legal Assistance Group (NYLAG) asked the Department to notify students who attended one of 60 schools operated by Wilfred American Education Corp. of their potential eligibility for federal loan discharges. This request was based on the Department’s own evidence that Wilfred committed widespread fraud, targeted vulnerable individuals and falsely certified loans for students who did not have a high school diploma. The overwhelming evidence led to criminal convictions of Wilfred’s management, as well as the Office of Inspector General’s recommendation that the Department grant all Wilfred students’ loan discharge applications.
In response to NYLAG’s request, the Department agreed only to notify students from one Wilfred campus of their potential loan discharge eligibility. Even after NYLAG filed a lawsuit, the Department decided to expend its resources fighting, rather than mailing notices to the remaining 40,000 Wilfred students. The Department should not be proud that it convinced the court to dismiss the lawsuit.
It is high time the Department started to use its authority to cancel loans on a broader basis and grant amnesty to the thousands of students who have attended for-profit schools that engaged in widespread legal violations. We urge the Secretary to start by discharging the loans of former Corinthian students and offering current Corinthian students a loan discharge option. We also ask that the Secretary notify all former Wilfred students of their potential eligibility for loan discharges.
