Warren Blasts Dept of Ed. for 'Hounding' Students Defrauded by For-Profit School

Sen. Elizabeth Warren (D-Mass.) is taking a stand for the tens of thousands of students who, first, were defrauded by the now-defunct, for-profit Corinthian College system and now, according to an investigation by her own staff, are being "hounded" by the U.S. Department of Education (DOE) to pay off those debts.

In a searing letter (pdf) to DOE secretary John King on Thursday, Warren said that the department's student loan bank is pushing nearly 80,000 former Corinthian College students into some form of debt collection, despite assurances that they would be eligible for loan discharges.

"It is unconscionable that instead of helping these borrowers, vast numbers of Corinthian victims are currently being hounded by the Department's debt collectors," she wrote, "many having their credit slammed, their tax refunds seized, their Social Security and Earned Income Tax Credit (EITC) payments reduced, or their wages garnished--all to pay fraudulent debts that, under federal law and the Department's own policies, are likely eligible for discharge that thus, invalid."

The for-profit education system--which included Everest Institute, Everest College, WyoTech and Heald colleges--was forced to shut down last year after the DOE announced it would fine the institution $30 million for duping students into signing up for loans to pay for an essentially worthless degree.

A number of former Corinthian students had launched a student debt strike against the fraudulent scheme, in particular, and the "untenable system of debt-financed higher education," more broadly.

Warren's investigation found that only 4,000 former Corinthian students had thus far been discharged of their loans, and she blasted the DOE for its cumbersome process for doing so.

Rather than providing defrauded students with "complete, immediate, and automatic relief" via the "borrower defense to repayment" provision within the Higher Education Act, as she had encouraged, Warren said that the DOE "has chosen to operate a complex, resource-intensive, unnecessary, and baffling scheme to parcel out relief on a student-by-student basis, forcing victims to affirmatively apply for the relief they are entitled to under the law, and insisting on its own separate findings of fraud despite clear evidence of wrongdoing from other state and federal authorities."

"Instead of adding insult to injury," she concludes, the DOE "should stand up for these students as it promised to do for more than a year and immediately halt all collections on these debt."

The DOE, she said, should use its authority to discharge all Corinthian borrowers' debts and "take additional steps to ensure that no other students are facing collections of shouldering debt that is eligible for discharge due to fraud perpetrated by for-profit colleges."

Indeed, the letter comes just two weeks after another for-profit education behemoth, ITT Tech, filed for bankruptcy amid similar accusations of fraud. ITT Tech's closure left nearly 35,000 currently enrolled students without a degree and countless more recent graduates jobless and saddled with outstanding loan debt.