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The White House Tries To Get Tough With Dodgy Colleges

By Shahien Nasiripour

The Obama administration will create a new enforcement unit within the Department of Education to crack down on colleges suspected of fraud, acting Secretary John King Jr. announced with great fanfare on Monday.

But student loan borrowers shouldn’t rejoice just yet. In reality, the department is simply reorganizing its oversight efforts, combining various teams and giving the combined entity a new name. It’s simply an “evolution,” King admitted Monday. And that’s not the only problem with the move: The enforcement division, critics warn, may have a serious conflict-of-interest problem.

This is at least the third time in five years that the Education Department has slapped a new name on its existing oversight efforts. In 2011 it formed the “Publicly Traded and Large Schools Workgroup,” a team that in the following three years failed to regularly meet, according to a critical report by the Education Department’s inspector general.

A few years later, in the wake of criticism that it was asleep at the wheel when disgraced for-profit chain Corinthian Colleges Inc. ran into financial trouble, the Education Department formed a “multi-regional review team” that is responsible for monitoring large and publicly traded school groups, according to its most recent annual report.

The latest “new” unit is supposed to allow the Education Department to “respond more quickly and efficiently to allegations of illegal actions by higher education institutions,” it said in a news release. While the department’s Federal Student Aid office, which oversees colleges and the government’s student loan program, has long had subpoena power, “we haven’t leveraged that,” James Runcie, who runs the FSA, said Monday. The department also announced that the White House would request an additional $13.6 million from Congress for the enforcement team.

The enforcement team could use the money. Thousands of former students have petitioned the department to cancel their federal loans, citing allegations that their schools defrauded them into taking on the debt. The reorganized enforcement team, after years of missing alleged abuses, will now rule on those applications. If the Education Department’s enforcement team rules in favor of borrowers, it’d effectively be admitting the department missed the fraud in the first place. Some consumer advocates argue this arrangement represents a conflict of interest.

To Robert Shireman, a former senior Education Department official under President Barack Obama now at the Century Foundation, the move represents “a very important culture shift at the Education Department, from seeing the colleges as friends who need help ‘complying’ [with the law] to a policing-the-market mentality that has been so sorely lacking.”

In recent years the Education Department has sat on the sidelines while the Consumer Financial Protection Bureau, Federal Trade Commission and state attorneys general all separately sued giant for-profit colleges accusing them of defrauding hundreds of thousands of students by advertising false job placement and graduation rates.

Those lawsuits came despite years of regular audits and exams by the Education Department, which allowed the schools to collectively reap billions of dollars in taxpayer cash in the form of student loans and grants from students who mostly didn’t graduate. The colleges have denied wrongdoing.

Democratic lawmakers, the department’s inspector general, the Government Accountability Office, and consumer and student advocacy groups have persistently criticized the Education Department’s oversight of the higher education industry, from its lackluster policing of dodgy colleges that defraud students to its close ties with loan companies and debt collectors that mislead borrowers hoping to repay their loans.

Monday’s announcement marks the latest attempt by the Education Department to rehabilitate its battered image. Last month it hired Rohit Chopra, formerly the nation’s student loan watchdog at the federal Consumer Financial Protection Bureau.

The department’s enforcement unit will be led by Robert Kaye, formerly of the Federal Trade Commission. Kaye will report to Runcie, who oversees the student loan program. Congressional Republicans blasted Runcie in November for running an organization that to them rewards failure.

“It is clear that FSA can not administer this program,” Rep. Virginia Foxx (R-N.C.) said that month. She told Runcie: “You are harming the people you are supposed to be helping, and that has to stop.”

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