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Sen. Elizabeth Warren, a Massachusetts Democrat, warned the court-appointed receiver for a defunct for-profit college chain not to collect on debts owed by former students.
Education Corporation of America, which operated the Virginia College and Brightwood College chains, abruptly closed 70 campuses across the country in December after struggling for years with declining student enrollment. The Education Department has canceled more than $22 million in federal student loans held by former students enrolled at ECA campuses. But the company is owed millions from loans made directly to students. Receiver John F. Kennedy wrote in a court filing in July that graduates of ECA programs owe more than $16.8 million and students who left those programs without graduating owed another $18 million. Kennedy reached a deal last month to sell those debts to a collections agency.
Warren wrote in a letter to Kennedy that any attempts by the receiver to collect on student debts nearly a year after the campuses' closure would be deeply concerning. "The receiver's apparent plan to sell these accounts receivable to third-party debt collectors to satisfy ECA's creditors is an unconscionable assault on the financial lives of former students, who have already suffered enough," she wrote.
Eleven other Congressional Democrats signed the letter, including Alabama Sen. Doug Jones, Sen. Patty Murray, the ranking Democrat on the Senate education committee, and Rep. Bobby Scott, the chairman of the House education committee.
The receiver already agreed not to collect on millions in debts owed by students who were still enrolled within 120 days of the campus closures. The Higher Education Act allows those students to have their federal loans forgiven through the closed-school discharge process. Students who left ECA campuses outside that 120-day window are still on the hook for their federal loans. And Kennedy agreed not to pursue debts of students eligible for closed-school discharge after requests from the offices of several state attorneys general. But Warren said ECA graduates couldn't expect any career support or other guidance that students receive from their colleges.
"The financial well-being and educational pursuits of these former students have been jeopardized, in no small part due to ECA's failure to clearly and directly disclose to students the institution's precarious situation," Warren wrote. "We recognize you have an obligation to settle the debts of ECA. However, targeting students who are already grappling with the consequences of ECA's sudden closure is cruel and callous, particularly when ECA did not take adequate steps to protect its students."
