DeLauro Urges Cardona to Establish a Stronger Process for Recouping Funds from Predatory Colleges
DeLauro to Cardona: "Predatory for-profit colleges should be on notice that there will be straightforward, substantial financial consequences for any unscrupulous behavior that leads to a successful borrower defense claim."
WASHINGTON, DC — Congresswoman Rosa DeLauro (CT-03), Chair of the House Appropriations Committee and the Labor, Health and Human Services, Education, and Related Agencies Appropriations Subcommittee, today sent a letter to Secretary Miguel Cardona urging the United States Department of Education to make changes to the proposed process for recouping funds from predatory institutions.
Today, the Department of Education will begin negotiated rulemaking on a variety of higher education topics including Borrower Defense, an Obama administration regulation that would have allowed students to have their federal student loan debt discharged if their school misled or defrauded them. Under the Trump administration, Secretary DeVos rolled back these regulations by making it harder for borrowers to seek relief and by making it easier for for-profit colleges to avoid financial penalties for serious wrongdoing.
In her letter, DeLauro wrote, "I appreciate that the Department recognizes how the recoupment process from institutions should serve as a strong deterrent to predatory for-profit colleges. Unfortunately, much of the language in Issue Paper #8 could render the recovery process toothless and fail to establish a strong deterrent effect that protects student borrowers."
While the Department of Education released draft proposals for Borrower Defense, DeLauro expressed concerns that the proposed process for recouping funds from predatory colleges fails to establish a strong deterrent effect to protect student borrowers and hold for-profit, predatory colleges accountable.
"I appreciate your consideration of these recommendations for the recoupment process to establish a strong deterrent effect that protects student borrowers," DeLauro continued. "Predatory for-profit colleges should be on notice that there will be straightforward, substantial financial consequences for any unscrupulous behavior that leads to a successful borrower defense claim."
The full text of the letter is below. A PDF copy is available here.
Dear Secretary Cardona,
In the 116th Congress, the House Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies held a hearing on predatory for-profit colleges. At this hearing, I heard testimony from a disabled veteran who was assured by a for-profit college that he could enroll using only grant aid and GI Bill benefits and would not need to take out any student loans to attend; however, he came to find out that he owed approximately $100,000 in student loan debt and was unable to find employment in his field of study after graduating from the for-profit institution. Sadly, his story is not an outlier.
To protect borrowers like these, I am writing to urge you to make changes to the Department's proposed process for recouping funds from predatory institutions. I appreciate that the Department recognizes how the recoupment process from institutions should serve as a strong deterrent to predatory for-profit colleges. Unfortunately, much of the language in Issue Paper #8 could render the recovery process toothless and fail to establish a strong deterrent effect that protects student borrowers.
Though I support the Department's proposal to separate the process of borrower relief from the adjudication of recoupment from institutions, I am concerned by the proposal to make the recovery process merely an option that can be exercised by the agency. The Department correctly recognizes that student borrowers who were harmed should receive swift relief without having to wait for potentially lengthy proceedings where institutions can contest determinations. However, the Department must draft strong rules that establish an expectation that there will always be straightforward, substantial consequences for the predatory actions that lead to a successful borrower defense claim. Under the previous administration, representatives of predatory for-profit colleges oversaw higher education policy at the Department and granted their sector every possible leniency and advantage during their tenure. If a proposal making recoupment merely optional was in place during that time, these conflicted individuals would have never exercised the option to recoup, letting predatory for-profit colleges off the hook. To address this concern, the Department can retain its proposal to first complete the borrower approval process and grant relief to successful claims; however, procedures for the subsequent institutional recoupment process should be automatic and formalized rather than optional. The Department may want to establish a reasonable, de minimis threshold for initiating this process in instances where the institution has closed and clearly lacks sufficient assets to cover liabilities.
In addition, I am concerned by the Department's proposal that the recovery "amount could be no greater than the amount of approved [loan] discharges but could also be less." To establish a strong deterrent effect through recoupment amounts, the loans discharged should be the floor rather than the ceiling. The Department should not give predatory institutions hope that they can always seek the lowest possible penalty when they commit wrongdoings that harm student borrowers. Instead, the Department should formalize a process to use its authority to impose sanctions and corrective actions on predatory institutions on top of recouping full amounts from loans discharged. Such sanctions should include fines commensurate with the scope of the misrepresentations and wrongdoing committed by the institution. Further, the Department should establish procedures that ensure recoveries and fines are received from the institution in a timely manner.
Finally, I am concerned that the Department is seeking to limit its ability to recoup funds from predatory institutions to any borrower defense relief for loans issued after the effective date of these regulations, pushing the timeline for meaningful accountability far into the future. Like the proposal to develop a single federal standard for all borrower defense claims regardless of when the loan was first disbursed, the Department should also seek to recoup loan discharges regardless of when the loan was disbursed. By proposing to significantly delay recoupment and sanctions for institutions that commit substantial misrepresentations and other misconduct, the Department will be granting predatory colleges a lifeline to operate for years without suffering any meaningful financial penalty. The Department should change its proposal and recoup funds retroactively to avoid this negative incentive and to strengthen the deterrent effect of the recoupment process.
As your Department works on these proposed regulations, I appreciate your consideration of these recommendations for the recoupment process to establish a strong deterrent effect that protects student borrowers. Predatory for-profit colleges should be on notice that there will be straightforward, substantial financial consequences for any unscrupulous behavior that leads to a successful borrower defense claim. Thank you for your attention to this matter.
Sincerely,
Rosa L. DeLauro
Chair
House Appropriations Committee