The Problem with the Justice Dept’s Settlement with EDMC

The Department of Education has the authority to discharge the federal student loan debt of students who are the victims of fraud—and they are doing so or at least planning on doing so in the case of students who attended the now-bankrupt Corinthian Colleges. However, in the case involving the Education Management Corporation (EDMC), the Justice Department reached a settlement with the for-profit college company, without EDMC having to admit to doing any wrongdoing. As a result, it is going to be much harder for students to have the proof they need to get their loans discharged than if the case had gone to trial and the Justice Department had prevailed.

Over the last decade, there have been dozens of such settlements with for-profit college companies – in which the companies agree to pay a fine but do not admit to any wrongdoing. What’s more, as part of the terms of these agreements, evidence of abuses that have been unearthed are sealed. As a result, no matter how airtight the cases are against them, the companies usually get off scot-free. They have to pay a fine, but they get to maintain their innocence—and few change their practices.

The settlements have not only given cover to the individual companies but to the for-profit higher education sector as a whole. The fact that nobody has been found guilty of anything (with the exception of Corinthian) has allowed the industry, as well as its backers on Capitol Hill and Wall Street, to remain in denial about the extent of the abuses that have occurred and the damage that has been done to students. Instead, these settlements have, in recent years, made it many times easier for for-profit college leaders and lobbyists to portray themselves as innocent victims of a partisan witch hunt, as they have fought efforts by the Obama administration and Senate Democrats to rein in the industry’s worst players and practices.

These settlements have also made it more difficult for students who have been the victims of the fraud to get the relief they deserve. Students go to college expecting to make better lives for themselves. They should not be left worse off – loaded down with debt but without the training they need to get jobs that will help them repay their loans.

[Cross-posted at Ed Central]

Stephen Burd

Stephen Burd is a senior policy analyst in the Education Policy Program at the New America Foundation.