The Department of Education announced Monday that it is creating a new organization to “respond more quickly and efficiently to allegations of illegal actions” by American colleges.
Department officials said that President Obama has included $13.6 million for the new office in his fiscal year 2017 budget proposal. Called the Student Aid Enforcement Union, it is slated to be led by one of the Federal Trade Commission’s top lawyers, Jeffrey Kaye; the current lead attorney for the commission’s Bureau of Consumer Protection.
“When Americans invest their time, money and effort to gain new skills, they have a right to expect they’ll actually get an education that leads to a better life for them and their families,” Acting Education Secretary John King Jr. said. “When that doesn’t happen we all pay the price. So let me be clear: schools looking to cheat students and taxpayers will be held accountable.”
The President’s complete budget proposal for the next fiscal year, which starts on Oct. 1, is due out on Tuesday, the same day as the New Hampshire presidential primaries. It will have more details about the White House’s broader enforcement priorities for the remainder of President Obama’s time in office.
The Department of Education and the Department of Justice came under fire late last year from Democratic senators for their handling of a settlement with the Education Management Corp. (EDMC), a for-profit college found to have defrauded students and taxpayers.
Sens. Elizabeth Warren (D-Mass.), Dick Durbin (D-Ill.) and Richard Blumenthal (D-Conn.) said the Obama administration “recovered a miniscule fraction of stolen taxpayer funds, held no individuals accountable while failing to even obtain an admission of wrongdoing from EDMC, and now may not even provide relief to thousands of students who owe billions of dollars in student loans because they were illegally recruited by EDMC.”
The senators additionally noted the settlement came after a September order issued by Attorney General Loretta Lynch, which directed federal prosecutors to toughen up on white collar crime.
“[A] mere two months after announcing this policy, when settling a case that recovered less that one percent of funds that were illegally gained by EDMC, DOJ garnered no admission of wrongdoing and held no individual accountable for the actions that singificantly harmed students and taxpayers,” the senators wrote.
Last month, the the Department of Education and the FTC announced they were taking action against another for-profit college operator, DeVry, for allegedly defrauding tens of thousands of students since 2008. The Huffington Post noted, however, that the FTC’s own court filings “suggest that as many as 300,000 students were harmed” by DeVry during 2008 and 2014.
There are currently 8,424 outstanding borrower claims against institutes of higher education, according to US News. Just more than 1,300 of those involve federally-guaranteed loans worth a total of $85.6 million.
