February 26, 2015

Senators to Education Department: Stop Profiting Off Student Loans and Fulfill Congressional Directives to Help Struggling Borrowers

WASHINGTON, DC —Noting that “(i)t is not the job of the Department of Education to maximize profits for the government at the cost of squeezing students who are struggling to get an education,” United States Senators Elizabeth Warren (D-Mass.), Sherrod Brown (D-Ohio), Jeff Merkley (D-Ore.), Richard Blumenthal (D-Conn.), Tammy Baldwin (D-Wis.), and Edward J. Markey (D-Mass.) sent a letter asking the U.S. Department of Education to “implement the directives it has been given by Congress to ensure that our most vulnerable young people struggling with the burden of federal student debt have meaningful opportunity to build a strong future for themselves and their families.”

In the letter, the Senators note that recent estimates show the federal government will produce $110 billion in profits from its student loan program over the next decade. “(I)t is striking that the Department still intends to generate such significant revenue from federal loan programs designed to help young people get an affordable education,” they wrote.

The letter explains that much of these profits will be collected in part because the Department of Education has failed to use its existing legal authority to help struggling borrowers. For example, the Department has failed to implement authority provided by Congress to allow borrowers’ debts to be cancelled when colleges act in ways that hurt the quality of their education or finances. The Department also has broad authority to compromise, modify, discharge, and cancel student debts, but instead “continues to gouge borrowers who struggle to meet their payments, subjecting them to debt collection, wage and benefit withholding, and other harsh penalties even when it is clear that the debtors cannot pay.” 

The Senators further note that the Higher Education Act requires the Department of Education to discharge loans for students who attend colleges that close their doors, but last year instead “undertook an elaborate plan to use federal funds to bail out the for-profit college chain Corinthian Colleges, Inc. and deprive students” of this option.

A PDF copy of the letter is available here.