Legislation protects students from deceptive practices and bad actors in the for-profit college sector

WASHINGTON – After President Donald Trump and U.S. Secretary of Education Betsy DeVos last week named a former official of the fraudulent DeVry University to direct the Department of Education unit in charge of combatting fraud, U.S. Senator Chris Murphy (D-Conn.) led U.S. Senators Dick Durbin (D-Ill.), Sherrod Brown (D-Ohio), Al Franken (D-Minn.), Richard Blumenthal (D-Conn.), Elizabeth Warren (D-Mass.), and Kamala Harris (D-Calif.) in reintroducing their Students Before Profits Act, a bill to protect students from deceptive practices and bad actors in the for-profit college sector. The bill ensures students have access to important and accurate information, strengthens oversight and regulation, and holds for-profit schools and their executives accountable for violations and poor performance.

“Putting a leader of a company that just got fined $100 million for defrauding students in charge of the government agency protecting students from being defrauded is head-spinning. Since the administration seems determined to turn the elements of the Department of Education into a get-rich-quick scheme that rewards the wealthy and big corporations on the backs of students, Congress is going to have to step up,” said Murphy. “Not every for-profit college is predatory, but the only way to separate the good from the bad is to crack down on the for-profit colleges who do prey on students, and hold their executives personally liable for any fraud they commit.”

“According to a report by Brookings, in 2014, 13 of the top 25 schools whose students owed the most in federal debt were for-profit schools.  When one of these schools collapses under the weight of its own wrongdoing, as was the case with Corinthian and ITT Tech, students are displaced, taxpayers are left on the hook, and company executives scatter to the winds,” said Durbin. “Well, this bill would change that.  Among other things, it would make executives – like Corinthian CEO Jack Massamino who made more than $3 million a year and ITT Tech CEO Kevin Modany who made more than $7 million in a single year – personally liable for the taxpayer losses they create by taking advantage of students.  This will bring real fairness to students who have been victimized and to taxpayers who have been fleeced by bad acting for-profit colleges.”

Brown said, “Bad actors in the for-profit college industry have promised their students great jobs and low costs, but have left them with nothing but a pile of debt and a useless degree – all while fleecing taxpayers. We’ve seen it too many times. Our students and taxpayers deserve better.” 

“It’s our job to make sure students who go to college are protected from fraudulent for-profit schools,” said Franken. “As a member of the Senate Education Committee, and a Senator from Minnesota—where we’ve seen this kind of fraud firsthand—I’m disturbed by the clear message from the Administration to deceitful for-profits that they have nothing to worry about while the President is in office. That’s why I’m proud to join my colleagues in this effort because fighting for students across our nation should always come before putting more money in the pockets of for-profit school executives.”

Blumenthal said, "Bad actors in the for-profit college industry have found new allies in the Trump Administration, where former executives have been put in charge of protecting against the very abuses they perpetrated themselves. Unless Congress takes action, this Administration will roll back the hard-won protections that keep these programs accountable for the false promises they sold millions of students. The Students Before Profits Act would protect against these wanton rollbacks by codifying critical requirements to hold for-profit schools accountable for abuse, and allowing students who have been victimized recourse to seek relief." 

Warren said, “When ITT Tech and Corinthian Colleges collapsed and left tens of thousands of students stranded with worthless college credits, students and taxpayers literally paid the price while the executives – who had made millions off these sham schools –faced no accountability. Because Secretary Betsy DeVos has given shady, for-profit colleges everything on their wish list so they can put their profits before students, we need the Students Before Profits Act so that students come first.”

"For-profit colleges like Corinthian engaged in systemic fraud and preyed on students by falsely promising a meaningful education that would lead to a job. Corinthian’s predatory behavior lined its pockets with profit at the expense of shattered dreams and mountains of bad debt for its students,” said Harris. “That’s why I sued them as Attorney General, and then worked with the Department of Education to forgive the loans for those young adults. It’s clear this Administration believes a quality education is a privilege, not a right, so we must fight to protect our students from deceptive practices.”

Currently, for-profit colleges enroll 10% of all postsecondary students, but account for 35% of all student loan defaults. Since Corinthian Colleges, the infamous for-profit institution, closed its doors earlier this year after extensive allegations of fraud, the U.S. Department of Education has discharged $247 million in student loan debt held by former students. The Students Before Profits Act provides for new tools to recoup federal dollars from the owners and executives who reap huge profits from failed, fraudulent for-profit institutions.

The Students Before Profits Act:

· Authorizes enhanced civil penalties on institutions and their executive officers if it is determined that the institution misrepresented its cost, admission requirements, completion rates, employment prospects or default rates, and uses those penalties to fund a Student Relief Fund to help defrauded students;

· Improves oversight of default rate manipulation by requiring the Secretary of Education to use corrected data to recalculate student loan cohort default rates for institutions of higher education that have engaged in default manipulation and make determinations on whether an institution should be disqualified from participating in financial aid programs;

· Makes college executives share the risk, giving the Department of Education broader discretion to require owners and executives to assume personal liability for financial losses associated with Title IV funds and including executives and owners among those against whom the Department can pursue a claim after discharging borrowers’ debts;

· Prevents “repeat offenders” by prohibiting board members and executive officers of an institution against which the Department has brought an enforcement action from serving in leadership positions at another college.