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For-profit Higher Education
The Education Department wields tremendous power over accreditors: Schools can receive federal student aid funds only if they’re accredited by organizations approved by the Education Department. The department can revoke its approval if accreditors aren’t up to snuff. But with less than a year left in office, it’s unlikely the Obama administration will achieve anything meaningful in reforming the accreditation system.
The Federal Trade Commission alleges the for-profit university misled students about their employment and income prospects, and Education Department seeks to stop DeVry from making deceptive advertisements.
The Department of Education recently held the first of three sessions of negotiated rule-making which focused on the borrower defense to repayment of student loans. The first session reviewed and brain-stormed the set of issues presented by the Department. Language developed from these discussions will be provided at the next neg-reg session, February 17-19.
In a book released on Friday, Mary Lyn Hammer says she has evidence that the department has overstated the number of defaults among borrowers at proprietary colleges and in the defunct bank-based student-loan program, while undercounting defaults at public colleges and in the direct-loan program. The agency’s alleged motive: to kill the for-profit sector and cover up its own mismanagement of student lending.
Americans are flooding the government with appeals to have their student loans forgiven on the grounds that schools deceived them with false promises of a well-paying career—part of a growing protest against years of surging college costs. In the past six months, more than 7,500 borrowers owing $164 million have applied to have their student debt expunged under an obscure federal law that had been applied only in three instances before last year.
Traditionally, colleges conduct on-campus interviews or enlist alumni to help. But with the surge in applications from China, colleges are unable to keep up with the volume of interview requests. To sift through the flood of applicants, more American institutions have sought third-party interviews with prospective students. This helps determine whether students who score high on paper can also engage in class discussions. It also provides a check against fraud, such as forged transcripts or application essays ghostwritten by hired agents, by testing their English-language abilities.
Last week, the Senator Elizabeth Warren achieved a quiet victory after the Federal Home Loan Bank of Des Moines restricted Sallie Mae offshoot and student loan giant Navient Corp.'s access to ultra-cheap funds -- causing stock in the company to plummet and demonstrating the unique ability of one of the Senate’s most liberal lawmakers to influence the bottom line of one of the nation’s largest publicly traded companies.
David Halperin writes: As a New York Times investigation recently reported, using Department of Education data analyzed by the Center for American Progress, 152 for-profit colleges under law enforcement investigation took about $8.1 billion in federal student aid last year.
The companies making student debt collection calls are just one part of an ecosystem feeding on federal student loans. There are also debt servicers, refinance lenders, firms that help former students stay out of default and for-profit schools that make money as borrowers try to repay more than $1.2 trillion in government-backed education debt.
A group of Americans swindled into taking on federal student loans may have Sen. Elizabeth Warren (D-Mass.) to thank for saving them from a tax-driven bureaucratic nightmare.