With Donald Trump’s presidency on the horizon, the U.S. Department of Education has worked in recent months to discharge the federal loans of students who attended for-profit colleges that have closed, leaving students stranded and in debt.

Over the last four years, several major for-profit college chains have closed or been shut down by the DOE, largely due to the use of misinformation in advertising.

Corinthian Colleges, for example, closed on April 15 after the DOE threatened to fine the company $30 million for using inflated job placement data to recruit new students, according to NBC News.

Meanwhile, the American Career Institute closed in 2013 because of financial problems and later admitted to having used falsified success rates and accepting unqualified applicants in a consent judgement reached in June 2016, according to The Boston Globe.

ITT Technical Institutes, another for-profit college, closed in September 2016 following the DOE’s decision to ban it from accepting students who benefit from federal financial aid, per the Los Angeles Times. More than 35,000 students were left with debt instead of diplomas.

“(Students at those schools) lost their grants. … They lost their time, they got humiliated and we’re never going to make those folks whole,” said David Halperin, who advocates against fraudulent for-profit institutions through various platforms, including his website Republic Report.

Many for-profit institutions attract low-income students who qualify for substantial federal student aid, with some for-profits deriving well over 80 percent of their revenue from federal funding, according to The Boston Globe. This means that students at for-profit schools often suffer when the schools shut down, said Tariq Habash, a policy associate at The Century Foundation, a left-leaning, nonpartisan think tank.

“Many of these student loan borrowers are living in poverty,” Habash said. “(When their claims are not processed quickly by the DOE) they’re hurt pretty badly in a situation where they are likely already struggling because an institution preyed upon them.”

In response to the recent wave of school closures and fraud investigations, the DOE has created new protocols to streamline the application procedures for borrower-defense discharges, Habash said.

“We are evaluating claims as quickly as possible,” Jim Bradshaw, a spokesman for the DOE, said in an email.

The DOE has also begun reaching out to students who might be eligible for student loan discharges through social media, email and postal mail, according to a statement on its website.

Students whose schools close before they are able to complete their degrees are eligible for a closed-school discharge, which allows them to either transfer their credits to another institution or have their loans forgiven, Habash said.

Students whose schools are found by the DOE to have engaged in misconduct or fraud may also be eligible for a borrower-defense loan discharge, which is done through bankruptcy, Habash said.

As of Jan. 13, the DOE has approved over 28,000 total claims by students of Corinthian Colleges, and more than 6,300 claims by students of ITT Technical Institutes, according to a statement published on the DOE website. Additionally, a June 2016 court ruling against ACI opened the door for the DOE to issue a blanket borrower-defense discharge for any of the 4,500 former ACI students whose loans have not already been discharged.

“You can see that the people working on this issue have done an enormous amount of work in the last few months,” Halperin said. “They’re doing years of work in just a few months.”

Still, some advocates have been pressuring the DOE to work even faster, fearing that the next administration may not prioritize debt relief efforts for students affected by school closures and fraud.

“The Department of Education has been heavily criticized by some of the student groups that we work with for going so slow on the debt relief,” Halperin said.

“I think the … concern (among activists) is that a more conservative administration might be even less willing to provide discharges to students than this current administration,” Habash added.

Both Halperin and Habash said the Trump administration’s position on the issue of fraudulent institutions and debt relief is hard to predict.

But despite the ambiguities in Trump’s educational policy, Habash said he does not think there is any hard evidence yet that the next administration won’t be open to pursuing debt relief for students who have been defrauded.

“I would strongly encourage advocates to continue to pressure the next administration as they have this administration in expediting the processes,” Habash said.

Published on January 18, 2017 at 10:09 pm

Contact Madeleine: mdavison@syr.edu