Attorney General Racine Urges Congress, Education Secretary to Maintain Federal Protections for Students at For-Profit Schools

Letter Reinforces Need for Protections Against Worst Actors in For-Profit School Industry

WASHINGTON, D. C. – Attorney General Karl A. Racine announced today that he has joined with his counterparts from 17 states to send a letter to U.S. Department of Education Secretary Betsy DeVos and congressional leaders expressing their continued support of recent federal consumer protections for students in higher education.

Highlighting how for-profit schools have harmed student borrowers, the letter detailed the officials’ concerns over rolling back federal protections -- an action, the signatories argue, that would signal “open season” on students for some of the worst actors in the for-profit school industry. They referred to the thousands of complaints they receive concerning higher education every year and their work to help students across the country who have incurred enormous amounts of debt for worthless degrees from many for-profit schools that engaged in fraudulent activity.

Attorney General Racine noted the great -- and increasing -- need for student borrowers to be protected from unscrupulous for-profit schools. “These existing federal protections are necessary to prevent harm to both students and taxpayers, and we urge Secretary DeVos and congressional leaders to preserve them,”he said. “We have seen a disturbing increase in the number of students buried under unsustainable loads of debt thanks to predatory for-profit schools. Over the last 10 years, total student debt in our country has ballooned from $450 billion to nearly $1.4 trillion -- much of it due to the growth in for-profit schools. In fact, of the 25 schools where students hold the most student loan debt, half are for-profit institutions. And when students who have been defrauded by for-profit institutions default on their loans, which they do at significantly higher rates than students at other types of institutions, taxpayers are left with the bill.”

The attorneys general who signed the letter pointed to a number of Department of Education protections for student borrowers they believe should remain intact, including:

  • The Gainful Employment Rule, which ensures students who attend career-training programs are able to repay their federal student loans once they graduate;
  • Vigorous federal oversight of school accreditors that are tasked with providing prospective quality assurance of schools;
  • And the Borrower Defense to Repayment Rule, which will provide a fair and transparent process for students who have been defrauded by their schools to apply for federal student loan relief.

OAG Efforts to Protect Student Borrowers
This letter is one of several recent efforts by Attorney General Racine and the Office of the Attorney General (OAG) to protect consumers from unscrupulous practices in the for-profit-college industry. In November 2015, OAG joined a nationwide settlement that altered the recruitment practices at EDMC colleges and retired $102 million debt owed by its students. Last year, OAG filed a lawsuit in D.C. Superior Court against Student Aid Center, an unscrupulous Florida-based company that was providing illegal debt relief services to students. OAG has also alerted former students of institutions operated by the for-profit Corinthian Colleges organization that debt forgiveness was available. The relief followed an investigation by state attorneys general and the Department of Education into deceptive practices by Corinthian. Earlier this year, Attorney General Racine and his counterparts from four states moved to intervene in a lawsuit defending a Department of Education decision to remove the accreditation credentials of an association that had vouched for predatory for-profit colleges, including Corinthian, that took advantage of student borrowers. OAG also provides resources to help student borrowers understand their repayment options and the programs available to lower their debts as well as resources on how to avoid student-loan scams.

Letter Excerpt
In part, the letter states:

Over the past fifteen years, millions of students have been defrauded by unscrupulous for-profit post-secondary schools. With accreditors asleep at the wheel, State Attorneys General Offices have stepped in to stop some of the worst abuses. The list of State Attorney General investigations and enforcement actions against for-profit colleges is long, including actions against: American Career Institute; Ashford University/Bridgepoint Education, Inc.; Corinthian Colleges, Inc.; Career Education Corporation; Education Management Corporation; Daymar College; DeVry University; ITT Tech; National College of Kentucky; and Westwood Colleges, among others.

These schools, and others like them, engaged in a variety of deceptive and abusive practices. Some promised prospective students jobs, careers, and further opportunities in education that the schools could not provide. Many schools inflated job placement numbers and/or promised career services resources that did not exist. Many nationally accredited schools promised that their credits would transfer, even though credits from nationally accredited schools often do not transfer to more rigorous regionally accredited schools. Many students were placed in loans that the schools knew from experience their graduates could not pay back. The schools were overseen by accreditors who failed to take action to protect students or the taxpayers who funded their federal student loans, despite ample evidence of these and other problems. In short, the entire for-profit education system was failing students and taxpayers.

As investigations and prosecutions initiated by our offices shed light on these problems, ED began to take steps to remedy these harms, issuing new regulations and reformulating policies to help protect students and taxpayers. Three of these steps – the Gainful Employment Rule, the policy of vigorous federal oversight of accreditors, and the Borrower Defense to Repayment Rule – are essential to protect both consumers and taxpayers from fraudulent actors in the for-profit education sector.

A copy of the letter is attached. Joining Attorney General Racine in signing it were attorneys general from Illinois, Connecticut, Delaware, Hawaii, Iowa, Kentucky, Maryland, Massachusetts, Minnesota, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington state. Also signing the letter was the Executive Director of Hawaii’s Office of Consumer Protection.