12.18.19

By: Gary Guthrie
Source: Consumer Affairs

Congressional leader claims Department of Education misses the point when it comes to defrauded students

In the wake of Secretary of Education Betsy DeVos’ appearance in front of a congressional subcommittee, Chairman Bobby Scott (D-VA) has gone on record saying that the Department of Education’s revised plan for helping defrauded students is inadequate. 

The biggest burr in Scott’s saddle continues to be that DeVos’ proposal only provides partial relief to students who borrowed money to attend for-profit colleges and wound up defrauded by those very schools. Scott said DeVos’ plan “makes clear that even when borrowers document widespread and pervasive fraud at their institution, the Department will not make them whole.”

A shell game?

“At Thursday's hearing, Secretary DeVos refused to acknowledge serious flaws in her plan to provide only partial relief to some defrauded borrowers while outright denying relief for others.” Scott wrote in a news release. The lawmaker pointed out that the plan that Devos presented at the congressional hearing was discreetly taken down from the Department’s website and replaced by another revised version.

“Unfortunately, rather than fixing the partial relief formula so it is fairer to students, the revised plan only improves the optics of denying defrauded borrowers the relief they deserve. Not one defrauded borrower will receive more relief under the revised plan. In fact, the Department already began notifying borrowers of their relief amount under the old formula.”

Scott says DeVos’ revisions continue to leave questions in their wake. 

“The Department’s decision to rapidly revise its formula, while preserving a predetermined outcome, raises several questions about the validity of its formula and the integrity of the process that produced it. We will be asking Secretary DeVos these questions and expect to get timely and responsive answers.”

Discord between FTC and DOE

The Federal Trade Commission (FTC) scored an important victory for defrauded students last Thursday in its case against the University of Phoenix -- a victory that cost the college plenty and got the students who were unfairly strapped by loans to attend the college some much-needed relief.

“After the financial crisis, many wondered whether the FTC would ever act to tame the latest abuses in the industry, despite its clear and unambiguous authority to do so,” FTC commissioner Rohit Chopra wrote when the settlement was struck. He went on to make it known that the agency is policing the for-profit education market for the good of the consumer.

“The Commission has settled charges with the University of Phoenix that it deceived students about their job prospects. The company will pay $50 million in restitution and will cease collection of certain unpaid tuition balances,” he said. 

The settlement also includes a bonus cancellation -- the erasing of $141 million students were on the hook for in unpaid tuition balances. According to one analysis of the situation, students who attended the University of Phoenix were on the hook for almost $36 billion in federal loans dating back to 2014. 

“Many of them struggle deeply to repay: 72 percent of borrowers attending the school made no dent in their student loans at all three years after leaving school. During this time, most of them would have seen their balances balloon” Chopra stated.

Can the FTC keep this going?

Is this the light at the end of the tunnel that swindled students have been hoping for? It could be if Chopra keeps a foot on the neck of those predatory colleges.

“Today’s action is an important milestone for the Commission. It concludes a years-long investigation of a massive for-profit college owned by influential investors, and it returns money to students who have been harmed,” Chopra said, stopping short of asking for an amen. 

“This and other recent actions finding unlawful, deceptive conduct will lay the groundwork for additional recoveries by student loan borrowers and taxpayers. Moving forward, it will continue to be critical to identify emerging unlawful practices in this sector before they inflict pain on individuals, honest businesses, and the country.”