Rules Proposed to Help For-Profit College Victims Too Weak, Say Debt Strikers

(Photo: Student Debt via Shutterstock; Edited: LW / TO)(Photo: Student Debt via Shutterstock; Edited: LW / TO)

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In June, a group representing fifteen students ripped off by for-profit colleges came to Washington to declare a debt payment strike and to ask the Department of Education to strengthen rules granting relief to scammed student debtors. Now, the department appears poised to propose regulations that the organization described as woefully insufficient.

In a rule-making process scheduled to occur over the next few days, the Department of Education looks set to establish a two-year statute of limitations and other significant barriers on who can file so-called “defense to repayment” claims. The scope of the proposed rules and the lack of immediate relief left members of The Debt Collective unsatisfied, months after it pushed the Obama administration into acting on the issue.

“They’re just now trying cover their own ass. They don’t want to give relief,” one debt-striker, 70 year-old Alicia Stevens said. “We didn’t ask for this.”

Stevens is $33,000 in debt after graduating from a Tampa, Fla.-area school operated by the now-bankrupt Corinthians College. Like most others who tell of being scammed by for-profit colleges, Stevens said she didn’t even know what her degree was worth until she showed up to job interviews.

“I got a piece of paper I can wipe my butt with,” she said. Stevens enrolled in school as a 59-year-old and would therefore be ineligible for relief under the proposal; as were about a half-dozen other strikers who met with The Sentinel in Washington on Wednesday; graduates and former students of Corinthians, Education Management Corp. (EDMC) and ITT Technical Institute schools. ITT Tech still operates 130 campuses in the US.

Other proposed rule changes seen as lamentable by the Debt Collective include the exclusion of students’ parents from defense to repayment claims, and a framework that would make borrowers prove the extent to which they were ripped off.

The Debt Collective has called for the Department to unilaterally wipe clean what they owe under existing rules, claiming that department officials failed students by allowing systemic fraud to take place, and that it will be difficult for students to obtain relief from bankrupt companies like Corinthians and EDMC.

“It’s not just some whiny millennials, which is what we often hear,” said collective member Amy Schneider, a graduate of Illinois Art Institute – an EDMC affiliate. “Fraud is fraud.”

The members of the Debt Collective are in Washington to lobby the Department of Education on the rule-making process. The department is holding public hearings on its proposal between Wednesday and Friday. Debt Collective members will also meet with lawmakers on Capitol Hill, while in Washington.

Late last year, Sens. Elizabeth Warren (D-Mass.), Dick Durbin (D-Ill.) and Richard Blumenthal (D-Conn.) blasted the Departments of Education and Justice for the terms of a settlement it signed with EDMC, and called on the Education Department to cancel students’ debts.

“It is clear that EDMC’s predatory practices caused material harm to its students, and we urge the Education Department to use its authority and all available evidence of EDMC’s fraudulent behavior to provide these students the full, immediate debt relief afforded by the law,” they said.

The Department of Education embarked upon its ongoing revision of defense to repayments rules in August, not long after the original fifteen members of the Debt Collective showed up in Washington to call on the Obama administration to act. The group now says it has 200 declared debt strikers in its ranks.

Many for-profit schools can trace a significant chunk of their revenues to federally-backed loans and student aid disbursements. In 2014, the Department of Education found that 27 for-profit colleges violated rules that are supposed to limit public funds to 90 percent of school income.

On Feb. 8, the Department of Education announced it would be creating an arm specifically to “respond more quickly and efficiently to allegations of illegal actions” by US colleges. The Obama administration asked Congress to grant the new agency $13.6 million next fiscal year.