Senator Warren Leads Colleagues Calling on Defunct For-Profit College Education Corporation of America to Stop Attempts to Collect from Former Students
Washington, DC – United States Senators Elizabeth Warren (D-Mass.) and Doug Jones (D-Ala), Ranking Member of the Senate Health, Education, Labor, and Pensions Committee Patty Murray (D-Wash.), Chairman of the House Education and Labor Committee Bobby Scott (D-Va.), and Chairman of the House Committee on Oversight and Reform Elijah Cummings (D-Md.), led their colleagues Senators Sherrod Brown (D-Ohio), Richard Blumenthal (D-Conn.), Kamala Harris (D-Calif.), Catherine Cortez Masto (D-Nev.), and Chris Van Hollen (D-Md.) as well as Representatives Suzanne Bonamici (D-Ore.) and Raja Krishnamoorthi (D-Ill.), in sending a letter to Stu Reed, President and CEO of now-defunct Education Corporation of America (ECA), and John F. Kennedy, ECA’s Receiver, regarding attempts to collect outstanding accounts receivable and other financial obligations from ECA’s former students. These attempts come nearly a year since the company’s collapse.
On December 5, 2018, after years of declining enrollment and revenue, ECA announced that it would immediately close its 70 campuses across the country. The closures impacted nearly 18,000 current students and scores of former students, many of whom had taken out thousands of dollars in federal student loans. Shortly before the collapse, a Receiver was appointed to oversee and manage debts held by ECA. While the Receiver reportedly agreed not to collect the accounts receivable from students enrolled at the time of ECA’s collapse, the Receiver did not make the same commitment regarding all former ECA students, including those who withdrew prior to ECA’s collapse.
Last month, after nearly a year since ECA’s collapse, the Receiver requested permission from a federal judge to collect the outstanding accounts receivable held by former students to help settle ECA’s remaining debts. According to court records, ECA’s Receiver has already identified a debt collector willing to purchase the outstanding accounts receivable.
“ECA’s collapse left former students who took out thousands of dollars in federal student loans with partially completed degrees or credentials with little to no value,” wrote the lawmakers in their letter. “Given the hardships many of these former students already face with regard to federal student aid, collecting on former students’ accounts receivable adds insult to injury.”
When ECA collapsed in December 2018, Senator Warren, Chairman Cummings and Representative Bonamici opened an investigation into the sudden collapse, demanding information from ECA. In their letter, the lawmakers detailed ECA's long history of financial instability, demanded a full accounting of events leading up to its collapse, and expressed concern about whether ECA appropriately warned students and regulators about the company's precarious financial standing as it teetered on the brink of collapse. In February 2019, The ECA Receiver responded to that investigation in a letter to the lawmakers, but did not provide evidence that ECA took appropriate steps to adequately notify students, faculty, and staff about ECA’s instability.
In separate letters sent to the Accrediting Council for Independent Colleges and Schools (ACICS), the failed accreditor responsible for giving ECA its stamp of approval prior to the collapse, and Education Secretary Betsy DeVos, the lawmakers demanded answers on the steps that ACICS should have taken to protect students affected by ECA's collapse, and demanded the Department of Education take immediate steps to aid and protect students, veterans, and taxpayers in the wake of ECA’s collapse.
Senator Warren has also successfully fought for students cheated by for-profit colleges to get their federal student loans cancelled, tax free. In 2014, Senator Warren forced the Department of Education to acknowledge that students defrauded by their colleges had a right to debt cancellation and launched a campaign to urge the Department to provide that relief. Through public letters, staff investigations, public awareness campaigns and coordination with state officials – Warren urged more and faster relief for cheated students. To date, the Education Department has announced student loan cancellations for more than 28,000 former students across the country cheated by Corinthian Colleges and some 4,500 Massachusetts students cheated by the American Career Institute.
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