Scott Statement on Obama Administration Actions to Protect Student Borrowers

WASHINGTON – Ranking Member Bobby Scott (VA-03) issued the following statement after the Department of Education announced automatic student loan discharges for borrowers who attended American Career Institute, a now-defunct college that admitted to breaking state law and purposely misleading students to pursue meaningless degrees and credentials. Former students who attended Corinthian Colleges Inc. and ITT Technical Institutions will also receive approvals for loan discharges in the coming weeks.

“It is the charge of the U.S. Department of Education to protect students and taxpayers from fraudulent colleges and universities, and the outgoing Administration has taken much needed steps to fulfill this charge. Time and time again, students throughout the country have been deceived by schools employing predatory practices and falsely promising a high quality education. The Department’s recently finalized Borrower Defense to Repayment rule establishes a process to streamline loan relief in cases of institutional wrongdoing and safeguards taxpayer dollars by requiring financial protections from risky institutions. It is crucial that the incoming Administration continues this important work of making defrauded student borrowers whole again and protecting taxpayers by retaining and implementing the Borrower Defense to Repayment rule.”


Continued Progress with Borrower Defense and Closed School Discharge Relief

The Department is making continued progress with adjudicating borrower defense claims and processing closed school loan discharges for impacted borrowers.  The Department has approved more than 12,000 additional claims from borrowers deceived by CCI’s falsified job placement rates since the most recent borrower defense claims report released in Oct. 2016.  Additionally, the Department has approved two additional types of borrower defense claims: those involving misrepresentations about the transferability of credits as the basis for debt relief, and those involving CCI’s false guarantees of employment for graduates.  To date, more than 28,000 total CCI claims have been approved, representing approximately $558 million in loan relief.

In Sept. 2016, ITT informed ED of its plans to cease operations. Following this announcement, ED launched an extensive outreach campaign to inform impacted students about their two primary recourses—seek federal student loan relief through closed school loan discharge, or attempt to transfer credits to another institution and continue their studies in a comparable program of study. To date, ED has received roughly 14,200 applications for closed school loan discharge from former ITT students. Approximately 6,300 have been approved totaling approximately $97 million in loan relief. Roughly 5,000 claims have been denied due to ineligible or incomplete submissions.  ED has also received over 2,500 borrower defense claims from former ITT students and is beginning to award the first discharges to affected students.

ED has already informed the vast majority of borrowers who have submitted claims that have been approved, but not yet discharged, of their approval status. Over 23,000 have already received an email notification. These borrowers can expect to receive full discharge relief within the coming weeks.

Building Debt Relief Awareness among Potentially Eligible Borrowers 

ED has continued pursuing various methods to inform borrowers that they may be eligible for borrower defense and closed school loan discharges. These include outreach to potentially eligible Corinthian borrowers who have not yet submitted applications through expanded postal mail outreach, a Facebook advertisement pilot, a servicer pilot that relies on emails, postal mail, phone calls, and texts, and an outreach partnership with state attorneys general. On Dec. 30, 2016, the Department published a new universal form to facilitate future outreach and to inform borrowers of how to apply for borrower defense relief. 

The Department will soon issue a Dear Colleague Letter addressed to privately-held Federal Family Education Loan (FFEL) holders with guidance on how to place FFEL loans in forbearance and halt collection activities when a borrower is seeking loan discharge through borrower defense. This guidance streamlines the process for suspending collection activity while the borrower’s claim is being reviewed by the Department.  

Protecting Students and Safeguarding Taxpayer Dollars 

The Obama Administration has worked tirelessly to protect students and taxpayers from fraudulent or failing higher education institutions. Those efforts include publishing final borrower defense regulations that protect student borrowers from misleading and predatory practices by postsecondary institutions and clarify a process for loan relief in cases of institutional misconduct. The regulations also protect taxpayers by ensuring that financially troubled institutions provide the government with protection against the risks they create. Additionally, the landmark Gainful Employment regulations end Federal student aid eligibility for career colleges that are not paying off for their students.  The recently released debt-to-earnings rates for Gainful Employment programs build on the Department’s ongoing efforts to promote college completion and increase accountability in the postsecondary education marketplace by setting standards for career training programs, including programs offered by for-profit institutions, to ensure they are serving students well.

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