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Three Senate Democrats are criticizing the Obama administration for settling a fraud lawsuit against Education Management Corporation last month without forgiving the loans of students who attended the for-profit college chain or holding the company’s executives personally accountable.
Senators Elizabeth Warren of Massachusetts, Dick Durbin of Illinois and Richard Blumenthal of Connecticut said in a letter Tuesday that they are “profoundly dissatisfied” with the settlement the Education and Justice Departments negotiated with EDMC to resolve allegations that the company illegally paid bonuses to its recruiters and lied to the government about it.
The senators called the $95 million EDMC agreed to pay in the settlement a “paltry” sum given the $11 billion in federal student aid that flowed to the company over the past decade. They said they were “highly troubled” that EDMC does not admit any wrongdoing in the settlement and that its executives were not sanctioned as part of the agreement.
Attorney General Loretta Lynch said last month that the amount of the settlement was based, in part, on EDMC’s ability to pay the fine. The company has been struggling financially amid falling enrollments and revenue.
In addition, the senators criticized the Obama administration for not including any student debt relief in the settlement.
A coalition of 38 states and the District of Columbia simultaneously reached separate settlements with EDMC that call for a total of about $100 million in private student loan forgiveness.
But federal officials, the senators wrote, “appear to have obtained nothing for students, leaving defrauded students holding the bag for billions of dollars in federal student loans they incurred after being illegally pressured to enroll.”
In announcing the settlement last month, Education Secretary Arne Duncan said his agency would not be forgiving the loans of EDMC students based on the settlement, because the allegations involved the company lying to the government as opposed to lying to students.
“What was found here was not misrepresentation to students,” he said. “It was lying to us,” the government.
On Tuesday, the senators wrote that Duncan’s statement was “logically absurd.”
"EDMC cannot be guilty of lying to federal officials about recruiting students unlawfully unless EDMC actually recruited students unlawfully," they said.
Education Department spokeswoman Dorie Nolt defended the EDMC settlement as having been “negotiated aggressively” by department lawyers.
“Secretary Duncan correctly stated that fraud against the United States was the focus of the government’s intervention in this case and that the settlement does not provide proof of wrongdoing against individual students,” Nolt said in an email. “However, as he also indicated, the department is ready to act on any evidence of wrongdoing against individual students.”
