WASHINGTON — Senator Elizabeth Warren chastised the US Department of Education for what she says is a failure to enforce federal higher education rules at the expense of millions of students victimized by questionable for-profit colleges and student loan servicers.
In a speech delivered Wednesday afternoon, Warren, a Massachusetts Democrat, called on the Education Department to “get tough” and “show that there’s a real cop on the beat.” She also called on Congress to hold the department accountable for its actions.
Warren recommends external checks on the department such as moving the student loan complaint system out of the Department of Education and over to the Consumer Financial Protection Bureau, which she helped establish.
“We don’t trust a bank to handle its own complaints, and we shouldn’t trust the federal student loan program to do it either,” Warren said.
“There are real reasons to worry about whether the Department of Education is committed to enforcing federal rules designed to help students,” she said.
She cites to two specific examples where she asserts that the Department of Education failed America’s students.
Instead of acting on concerns of financial misconduct by Corinthian Colleges, a for-profit institution that has declared bankruptcy, Warren accuses the department of allowing the college to keep enrolling students and draining more federal funds despite years of awareness about concerns at the school. At its peak, the college had 120 campuses and enrolled more than 100,000 students.
“When Corinthian’s dangerous mix of mismanagement and deception finally blew up, the Department stepped in to bail out the college and keep it alive longer,” Warren said.
Arne Duncan, secretary of the Department of Education, announced this week that the department would forgive the loans for students defrauded by Corinthian. But Warren says he should do more — “particularly since the students were defrauded while the Department of Education passed up one opportunity after another to stop Corinthian from cheating more students.”
In a press call on Monday, Duncan blamed Congress for failing to give the Department of Education enough resources to be effective. He said he hopes the Corinthian Colleges debacle serves as a “wakeup call” to both the for-profit college industry and to Congress.
“Congress has fought us every step of the way when we’re just trying to bring some basic accountability to the industry,” Duncan said. “It’s been a huge problem.”
Warren also criticized the Department of Education for failing to take action against Navient, one of the country’s largest student loan servicers. The Department of Justice and the FDIC hit the company with a $100 million fine last year for failing to cap interest rates on federal and private loans for members of the armed forces, as required by law, Warren said. Despite the settlement, she said she is troubled by the fact that Navient is continuing to service millions of federal student loans.
“Instead of taking action against Navient, the Department of Education conducted its own investigation, and a year later announced, inexplicably, that Navient had not engaged in misconduct,” Warren said. “What’s going on?”
Warren said she and Senator Tom Harkin, an Iowa Democrat who has since retired, questioned the head of the department’s student loan program last year about why it continues to work with Navient despite its pattern of rule breaking. She said the official pointed out that canceling the contract would mean the department would have to transfer millions of borrowers to a new servicer.
“In other words, in the view of senior officials at the Department of Education, Navient is simply too big to fail,” Warren said.
In response to Warren’s speech, Denise Horn, a Department of Education spokeswoman, said the department uses a different criteria than the Department of Justice in determining compliance.
“Our review looked only at whether the servicers complied with the Higher Education Act and our regulations and contracts,” Horn said in an email to the Globe. “Our findings identified that less than one percent of borrowers were incorrectly denied the six percent interest rate cap.”
Warren delivered her speech to more than 100 educators and policy makers at the Shanker Institute at the American Federation of Teachers headquarters.Tracy Jan can be reached at tracy,firstname.lastname@example.org. Follow her on Twitter @TracyJan.