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The U.S. Department of Education announced Joseph A. Smith has been appointed as special master to help the department and student borrowers through the debt relief process in the wake of the Corinthian Colleges shutdown. Smith's appointment is a part of the Obama administration's debt relief plan that is expected to help federal borrowers who can prove they were defrauded by their college.
Smith was appointed in 2013 to monitor consumer relief obligations included in the $13 billion settlement between the U.S. Department of Justice and JPMorgan Chase. In 2012, he was appointed by a bipartisan group of state attorneys general, the federal government and the five largest mortgage servicers to monitor the National Mortgage Settlement -- the largest consumer financial protection settlement in U.S. history.
"Throughout my career in financial services regulation, I have worked to protect the interests of both consumers and taxpayers. That is why it is an honor and a privilege for me to work with the Department of Education on this matter, where I will extend that commitment to protect students as well. In all my work, disclosure and communication have been critical to gaining public trust," Smith said.
While he won't have ultimate decision-making authority in granting debt relief to students, Smith will create an application for borrowers to apply for loan forgiveness, make recommendations on issues and strengthen the process so the department can recover money from schools after successful borrower defense claims.
As of June 23, the department has received 4,500 applications for closed school loan discharges, 1,400 borrower defense claims and 850 online requests to enter forbearance or stop debt collection, Under Secretary of Education Ted Mitchell said.
"They're mostly Corinthian, but there are some other schools trickling in," Mitchell said, although he wasn't able to immediately identify those other institutions.
Mitchell acknowledged that while the department is currently dealing with Corinthian students, it is very likely other institutions will be headed down a similar path, which is why it was important to develop a process for recovering taxpayer dollars from institutions found to be at fault.
"We're hoping and confident that Joe will help us establish procedures that will not only address the Corinthian matter, but subsequent iterations of borrower defense," he said. "We have the right and obligation to retrieve funds from the institution itself."
