September 08, 2017

Harris, Senate Democrats Introduce Students Before Profits Act

Legislation protects students from deceptive practices and bad actors in the for-profit college sector

Legislation protects students from deceptive practices and bad actors in the for-profit college sector

WASHINGTON, D.C. – After President Donald Trump and U.S. Secretary of Education Betsy DeVos last week named a former official of the fraudulent DeVry University to direct the Department of Education unit in charge of combatting fraud, U.S. Senator Kamala D. Harris joined Senate Democrats in reintroducing the Students Before Profits Act, a bill to protect students from deceptive practices and bad actors in the for-profit college sector. The bill ensures students have access to important and accurate information, strengthens oversight and regulation, and holds for-profit schools and their executives accountable for violations and poor performance. In 2013, as Attorney General of California, Harris sued Corinthian Colleges for false and predatory advertising, securities fraud and intentional misrepresentations to students, winning a $1.1 billion judgment.

"For-profit colleges like Corinthian engaged in systemic fraud and preyed on students by falsely promising a meaningful education that would lead to a job. Corinthian’s predatory behavior lined its pockets with profit at the expense of shattered dreams and mountains of bad debt for its students,” said Harris. “That’s why I sued them as Attorney General, and then worked with the Department of Education to forgive the loans for those young adults. It’s clear this Administration believes a quality education is a privilege, not a right, so we must fight to protect our students from deceptive practices.”

Currently, for-profit colleges enroll 10% of all postsecondary students, but account for 35% of all student loan defaults. Since Corinthian Colleges, the infamous for-profit institution, closed its doors earlier this year after extensive allegations of fraud, the U.S. Department of Education has discharged $247 million in student loan debt held by former students. The Students Before Profits Act provides for new tools to recoup federal dollars from the owners and executives who reap huge profits from failed, fraudulent for-profit institutions.

The Students Before Profits Act:

  • Authorizes enhanced civil penalties on institutions and their executive officers if it is determined that the institution misrepresented its cost, admission requirements, completion rates, employment prospects or default rates, and uses those penalties to fund a Student Relief Fund to help defrauded students;
  • Improves oversight of default rate manipulation by requiring the Secretary of Education to use corrected data to recalculate student loan cohort default rates for institutions of higher education that have engaged in default manipulation and make determinations on whether an institution should be disqualified from participating in financial aid programs;
  • Makes college executives share the risk, giving the Department of Education broader discretion to require owners and executives to assume personal liability for financial losses associated with Title IV funds and including executives and owners among those against whom the Department can pursue a claim after discharging borrowers’ debts;
  • Prevents “repeat offenders” by prohibiting board members and executive officers of an institution against which the Department has brought an enforcement action from serving in leadership positions at another college.