09.14.16

SCHUMER: DROVES OF NY COLLEGE STUDENTS LEFT OUT IN COLD WHEN ITT TECHNICAL INSTITUTE CLOSED SCHOOLS IN UPSTATE NY WITH NO NOTICE; SENATOR PUSHES FEDS TO FINALIZE NEW RULES THAT WOULD GIVE ALL COLLEGE STUDENTS & PARENTS FAIR WARNING IF SCHOOL IS IN DANGER OF CLOSING, ABILITY TO SUE SCHOOLS THAT DEFRAUD THEM & BETTER OVERALL PROTECTIONS

Just As Students Were Headed Back To Classes, ITT Tech, Facing Serious Financial Issues & Accreditation Sanctions, Decided To Close, Leaving Hundreds Of Students Across Albany, Getzville & Liverpool Campuses In The Lurch – Last Year, Everest College In Rochester Closed & Left 400+ Students Stranded

Senator Pushes Dept. Of Education To Finalize Proposed Rules That Would Allow Students & Parents To Legally Pursue Colleges That Defraud Them, Discharge Students Loans If They’ve Been Duped, Access The Information They Need To Plan For The Future 

Schumer: Fed Alarm Bells Signaling ITT Tech Trouble Were Ringing For Months, But Students Never Knew

During a conference call with reporters, U.S. Senator Charles E. Schumer called on the U.S. Department of Education to finalize proposed rules that would better protect students and parents that have been misled, defrauded or have fallen victim to unfair practices employed by institutions of higher education. Schumer launched a three-pronged push in the wake of reports of ITT Technical Institute’s recent closure. ITT Tech operated campuses in Getzville in Erie County, Liverpool in Onondaga County and the City of Albany, and its abrupt closure has left hundreds of Upstate NY students in the lurch, facing the tough choice of whether they should give up on schooling, or try and transfer their credits elsewhere and start over. In 2015, Corinthian-owned Everest College in Rochester also closed and left more than 400 Upstate NY students stranded. Schumer said this is wrong and Congress must help ensure that, as students and their parents invest in their education and attend college, they are treated fairly on all fronts.

“College students and their parents should not have to shake the 8-ball when it comes to asking about their school’s financial footing,” said U.S. Senator Charles Schumer. “Students and parents deserve crystal clear answers from the school themselves and a fair warning if fiscal trouble could lead to an abrupt closure. Anything less is just unacceptable. On top of that – they deserve the right to recoup their losses by taking legal action against schools and/or discharging student loans if they’ve been defrauded by institutions like this. The fact that college closures across the U.S. are on the rise demands the U.S. Department of Education implement better protections for our students as soon as possible. Our young people and their parents need to be told the truth about their colleges’ financial health or lack thereof, even if the truth hurts.”

Specifically, Schumer is calling on the Department of Education to finalize proposed rules that would require colleges and universities to notify students of a possible closure, take legal action against a school that misled students about a school’s nationally recognized education standards, and create a mechanism by which students can discharge their federal student loans should they fall victim to unfair and abusive practices employed by institutions of higher education. Schumer said that there are too many colleges like ITT Tech across the country and students deserve better. In fact, just last year, Corinthian-owned Everest College in Rochester abruptly closed, leaving more than 400 Upstate NY students in the lurch as well.

Schumer explained that ITT Tech had been facing financial problems as well as federal sanctions due to accreditation issues for months. In late August, the Department of Education announced that ITT Tech would be banned from taking in new students who use financial aid. Just this last week, and right as students were heading back to classes, ITT Tech abruptly announced it would be closing – which resulted in employees being laid off and hundreds of students across its three campuses facing the tough choice to either give up or try and transfer their credits elsewhere and start over.

Schumer said these newly proposed federal rules would help students in three main ways:

-First, it would create a pathway to federal student loan discharge for those who are the victims of unlawful and abusive practices. Schumer said that is only fair after students and parents have been defrauded and put their student loans towards a school that was deceptive in their practices. This action would be supplemented by the creation of an important incentive against future abusive practices, which will hopefully reduce the number of students that could face this situation of their school closing or being subject to deceptive practices.  

-Second, schools would be required to notify students and parents as soon as the institution of higher education is designated in the Department’s ‘danger zone’ – meaning the school is on unstable financial standing and/or at risk of closing its doors. Schumer said this move is aimed at protecting college students from being put at risk in the event that their school closes. Schumer today explained that a notification warning system in particular would shine a light on a college’s bleak financial stance so students could formulate a contingency plan to protect their academic credits, financial aid and most importantly, their futures. Schumer said students have been scrambling to access official records and student transcripts, as well as attempting to secure future placement in nearby colleges with which to complete their degrees, though the accreditation issues could impact the ability to transfer certain degree requirements. Schumer said that all colleges and universities that received Title IV federal funding should be required to adhere to this proposed notification warning system, as federal student aid programs are authorized under Title IV of the Higher Education Act of 1965, and provide grants, loans, and work-study funds from the federal government to eligible students enrolled in college or career school.

-Finally, this rule would eliminate mandatory arbitration clauses, which would assist in a student’s ability to take swift action after unfair treatment by an institution. Schumer said students and parents should be able to take legal action against a school, like ITT Tech, that led students to believe the school met nationally recognized education standards. Schumer said institutions that benefit from federal aid, as ITT Tech does, must be held accountable for such standards.

A September 2015 Moody’s Investor Service report narrates a rise in college closures across the country. According to the report, closures among four-year public and private non-profit colleges averaged five per year from 2004-2015. In 2014, six colleges closed and Moody’s predicts as many as 15 institutions per year could close by 2017. 

A copy of Schumer’s letter to the Department of Education appears below:

Dear Secretary King,

I write to thank you for working to provide relief to and protect students in your recently proposed Department of Education borrower defense regulations. The proposed regulation would help students that have been defrauded by an institution of higher education and these students deserve to be protected from abusive or unfair practices in higher education.

As you know, the recent borrower defense proposal protects students who are victims of unfair and abusive practices by implementing policies that put student needs first. It would create a mechanism by which students can discharge their federal student loans. In addition, the proposed regulation would ensure that students are given timely warning about the status of their school as a for-profit institution or if their school is on unstable financial standing and/or at risk of closure. I applaud the Department’s changes and believe there is still room for improvement.

The recent news of the closing of ITT Technical Institutes throughout the country underscore the importance of these protections for students and student loan borrowers. One critical part of this regulation is a requirement for colleges and universities to notify or warn students of a possible closure as soon as the school is designated in the Department’s ‘danger zone’ – meaning the school is at financial risk of closing its doors. A warning or notification system would allow students to be informed about the financial status of their school and a step to protecting college students from being put at risk in the event that their school closes.

The proposed borrower defense regulation would create a pathway to federal student loan discharge for those who are the victims of unlawful and abusive practices. It would also create an important incentive against future abusive practices which will hopefully reduce the number of students that could face this situation of their school closing or being subject to deceptive practices. In addition to a pathway for student loan discharge for these students, an important part of the proposed regulation is the creation of a path for groups of defrauded borrowers to get automatic relief without having to submit individual applications. After the closing of Corinthian Colleges, there have been few students that have received this relief and this new path will expedite this process for these students as well as any other student that may unfortunately go through the experience of having their school close. Students deserve better and a greater sense of security should they have to go through this and we hope as you finalize these propose regulation you will strengthen these proposals to help students.

Additionally, I applaud the proposed steps to eliminate mandatory arbitration clauses which would assist in a student’s ability to take swift action after unfair treatment by an institution. Last month, ITT Tech was banned from enrolling new students that use financial aid after the institution failed to comply with necessary education and operation standards set by the Accrediting Council for Independent Colleges and Schools. Institutions that benefit from federal aid, as ITT Tech does, must be held accountable for such standards. Eliminating mandatory arbitration would allow students to take legal action against a school, like ITT Tech, that led students to believe the school met nationally recognized education standards.  

We must do all we can to ensure that as students invest in their education and attend college they are treated fairly on all fronts. I look forward to working with you and my Senate colleagues to protect the rights of students across the country.

Sincerely,

Charles E. Schumer

United States Senator  

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