October 27, 2020

Warren, Hassan, Murphy, Colleagues to Betsy DeVos: For-Profit College Executives and Shareholders Who Cheat Students Should Be Held Personally Accountable

"Historically, the Department of Education has failed to hold owners and executives of for-profit colleges that defrauded students financially accountable, despite having the clear legal authority to do so."

Text of Letter

Washington, DC - United States Senators Elizabeth Warren (D-Mass.), Maggie Hassan (D-N.H.), and Chris Murphy (D-Conn.), all members of the Senate Health, Education, Labor, and Pensions (HELP) Committee, led a letter to Secretary of Education Betsy DeVos, calling on the U.S. Department of Education to hold corporate executives and shareholders of for-profit colleges personally and financially responsible for cheating students and to collect damages from them using its existing legal authority under the Higher Education Act of 1965 (HEA). The letter is also signed by Senators Sherrod Brown (D-Ohio.), Ranking Member of the Senate Committee on Banking, Housing, and Urban Affairs, Dick Durbin (D-Ill.), and Richard Blumenthal (D-Conn.). 

"It is simply inexcusable for the Department to continue to allow corporate executives to profit from school closures when Congress has given it the explicit duty and additional authority to seek compensation from those very individuals. The Department, however, has failed to discharge its duties and exercise its authorities provided under law, leaving students and taxpayers on the hook for more than a billion dollars in losses in the last few years alone," the lawmakers wrote. 

In recent years, the conduct and closures of for-profit colleges such as Corinthian Colleges, ITT Technical Institutes, Argosy University, and Vatterott College have upended the lives of hundreds of thousands of students. In many instances, they misled and defrauded students through deceptive marketing and recruitment activities that made misrepresentations to students to entice them to enroll and take on debt. The ultimate closure of many of these predatory for-profit colleges has left students and taxpayers holding the bag for this fraud, which often made for-profit college owners and executives extremely rich. 

For instance, the closure of Corinthian Colleges alone has resulted in more than $558 million in approved student loan discharges for student borrowers, while the company reportedly paid nearly $1 million in bonuses to its executives weeks before its collapse. Similarly, the Department has estimated that ITT Technical Institute's collapse would cost the Department more than $440 million, including interest and other charges. 

However, Congress did not intend for owners and executives to escape liability for their wrongdoing. The HEA gives the Secretary of Education both the obligation to pursue any student loan discharge resulting from school closure "against the institution and its affiliates and principals" and the additional authority to recover these losses from individuals who exercised "substantial control" over these institutions, including individuals who have an ownership stake and those who served as members of the board of directors, the CEO, or in other positions with substantial control. Specifically, in order "to protect the financial interest of the United States," the HEA allows the Secretary to require "the assumption of personal liability, by one or more individuals who exercise substantial control over such institution, as determined by the Secretary... for financial losses to the Federal Government, student assistance recipients, and other program participants for funds...and civil and criminal monetary penalties..." 

The lawmakers asked the Department to respond to their questions no later than November 9, 2020.

Senator Warren has been a champion for students throughout her years in the Senate, fighting to protect America's students from predatory for-profit colleges and greedy student loan companies and to create more opportunities for young people. 

  • She demanded that the Department of Education hold student loan servicer, Great Lakes Education Loan Services, Inc. accountable for CARES Act blunder that likely lowered credit scores for millions of borrowers;
  • She introduced a resolution with Senate Democratic Leader Chuck Schumer (D-N.Y.) outlining a bold plan for the next President of the United States to use existing authority under the Higher Education Act to cancel up to $50,000 in Federal student loan debt for Federal student loan borrowers;
  • She has worked with House Majority Whip James E. Clyburn (D-S.C.) to close the racial wealth gap by introducing legislation, the Student Loan Debt Relief Act, which would cancel student loan debt for 42 million Americans;
  • She prioritized student debt relief and fought to lower student loan interest rates, introducing the Bank on Students Loan Fairness Act as her first bill in Congress;
  • She conducted rigorous oversight of the for-profit college industry and helped secure three-quarters of a billion dollars in debt relief for students who were cheated by predatory for-profit colleges, including 4,500 Massachusetts students and more than 28,000 students across the country.

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