The U.S. Education Department, which has been sharply criticized for its slow response to problems at the now-defunct Corinthian Colleges, is pledging to react “more quickly and efficiently” to allegations of wrongdoing by colleges.
In President Obama’s final budget request, due out on Tuesday for the 2017 fiscal year, the agency will seek $13.6 million for a new “Student Aid Enforcement Unit” to be led by a top consumer-protection lawyer from the Federal Trade Commission, Robert Kaye.
The freestanding unit, which will report to the chief operating officer of the Office of Federal Student Aid, will initially consist of “a few dozen” employees who are already involved in oversight and borrower protection, department officials told reporters on Monday. But the department plans to hire many more employees if Congress approves its budget request.
John B. King Jr., the department’s acting secretary, said the new unit would “streamline and enhance” the agency’s enforcement capabilities and allow it to answer requests for loan forgiveness more quickly.
‘The department is taking an important step forward by focusing on strengthening and institutionalizing the important work of enforcement.’
In the year and a half since Corinthian’s collapse, some 8,424 borrowers have applied for loan discharges on the grounds that they were defrauded by their colleges. More than 1,300 of those “borrower defense claims,” totaling $28 million, have been approved, along with almost $86 million in “closed school” discharges, for students who attended shuttered Corinthian campuses, the department said.
Consumer advocates, who have urged the department to step up its oversight of for-profit institutions like Corinthian and to speed up the loan-forgiveness process, welcomed word of the new enforcement unit on Monday.
“The department is taking an important step forward by focusing on strengthening and institutionalizing the important work of enforcement,” said Lauren Asher, president of the Institute for College Access and Success.
Abby Shafroth, a staff attorney with the National Consumer Law Center, said her group was “encouraged the department intends to take a more proactive stance in investigating and taking action against institutions that engage in misconduct at the expense of students.”
‘More of the Same’
It remains to be seen, however, whether the unit will transform how the department does business, or will simply reshuffle the proverbial deck chairs. Much of the work that the new unit will take on is now being done in other parts of the department. Only one new hire, Mr. Kaye, is being made now — albeit a key one.
Noah Black, a spokesman for the Association of Private Sector Colleges and Universities, the main trade group for the for-profit sector, dismissed the new unit as “more of the same” from people in the administration who “aren’t big fans of ours.”
“It’s a one-off rather than a real effort to improve student outcomes,” he said.
But department officials said the new structure will improve coordination and communication within the department, between it and other government agencies, and among federal and state investigators. The under secretary of education, Ted Mitchell, said segregating investigations from the day-to-day work of program reviews will allow the department to conduct investigations “faster and better.”
“Right now, we’re having to borrow and stretch” to meet both responsibilities, he said.
‘It’s a one-off rather than a real effort to improve student outcomes.’
Monday’s news conference occurred just hours after the Apollo Education Group, the parent company of the University of Phoenix, announced that it was going private, in a $1.1-billion deal with a consortium of investors. If the sale is approved by the department and accreditors, the new chairman will be Tony Miller, who was deputy secretary of education under Mr. Obama from 2009 to 2013 and is a partner at one of the firms behind the deal, the Vistria Group.
Asked if the department would bless the deal, officials told reporters that it would be “premature and inappropriate” to discuss the department’s plans.
In a news release issued on Monday, Mr. Miller promised to bring change to the University of Phoenix, the largest for-profit college and the subject of several continuing investigations.
“For too long and too often, the private education industry has been characterized by inadequate student outcomes, overly aggressive marketing practices, and poor compliance,” Mr. Miller said. “This doesn’t need to be the case.”
After the news conference, the department provided a statement in which Mr. Mitchell said it was “encouraging that the Vistria Group is talking about a focus on improving student outcomes.”
“We’ll be watching closely,” he said, “to ensure that they follow through on this commitment.”
Correction (2/9/2016, 10:45 a.m.): This article originally rendered figures for “borrower defense claims” and “closed school” discharges, for students who attended shuttered Corinthian campuses, in billions of dollars by mistake. They are $28 million and $86 million, respectively. The article has been updated to reflect that.
Kelly Field is a senior reporter covering federal higher-education policy. Contact her at kelly.field@chronicle.com. Or follow her on Twitter @kfieldCHE.
