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Warren, Senate Democrats Urge DeVos to Hold Owners of For-Profits Financially Liable

October 27, 2020
 
 

Senator Elizabeth Warren and five other Democratic senators are urging Education Secretary Betsy DeVos to do more to hold the owners for-profit colleges personally financially liable for the cost to the federal government if the colleges are found to have defrauded their students and then closed.

The move comes as some, including former members of the Obama administration, are preparing to push the Education Department under a Biden administration to aggressively use its powers to crack down on for-profits, should the Democratic presidential candidate win next week’s election.

“In recent years, the conduct and closures of for-profit colleges such as Corinthian Colleges, ITT Technical Institutes, Argosy University, and Vatterott College have upended the lives of hundreds of thousands of students,” the senators wrote DeVos on Monday.

“The ultimate closure of many of these predatory for-profit colleges has left students and taxpayers holding the bag for this fraud, which often made for-profit college owners and executives extremely rich,” the letter said.

It said, for example, that the closure of Corinthian cost the federal government $558 million in canceled student loans. Yet the senators pointed to a Reuters report that the chain had paid its executives millions of dollars in bonuses in the months before its closure.

The nation’s main higher education law, the Higher Education Act, “gives the Secretary of Education both the obligation to pursue any student loan discharge resulting from school closure ‘against the institution and its affiliates and principals’ and the additional authority to recover these losses from individuals who exercised ‘substantial control’ over these institutions, including individuals who have an ownership stake and those who served as members of the board of directors, the CEO, or in other positions with substantial control,” the senators wrote.

“Historically, the Department has failed to hold owners and executives of for-profit colleges that defrauded students financially accountable, despite having the clear legal authority to do so,” the letter said.

Among those Democratic senators signing the letter, in addition to Warren, of Massachusetts, were Maggie Hassan, of New Hampshire; Richard Durbin, of Illinois; Sherrod Brown, of Ohio; and Richard Blumenthal and Chris Murphy, both of Connecticut.

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