Student-loan borrowers just got an added layer of protection from schools that take advantage of them 'to make a quick buck'
- The Education Department announced new enforcement actions to crack down on fraudulent behavior.
- It will be using secret shoppers to identify misleading behavior that push students to take on debt.
On Tuesday, President Joe Biden's Education Department announced that the Enforcement Office within Federal Student Aid (FSA) will begin using secret shoppers to keep an eye on schools participating in federal financial aid programs.
As the press release explained, secret shoppers are people who will look for "misrepresentations regarding the transferability of credits, job placement rates, completion and withdrawal rates, graduates' future earning potential, career services, the cost of attendance, the amount of federal student aid, and accreditation status, along with any other practices that may violate the laws and regulations governing an institution's participation in the federal student aid programs."
Findings from secret shopping will be used as evidence to support any investigation the department will conduct into a school that could be engaging in predatory behavior.
"Secret shopping is another tool in FSA's toolbox as we expand our oversight work to hold predatory schools accountable," FSA Director Richard Cordray said in a statement. "Our focus—as always—is to ensure that students, borrowers, families, and taxpayers are not being preyed upon to make a quick buck."
Alongside the secret shopping announcement, FSA also released a blog post on enforcement actions to protect service members and veterans from "aggressive and misleading recruiting practices" that could lead those students to take on more debt than they can afford to pay off.
"Consequences for schools that violate these prohibitions could include the termination or limitation of a school's participation in the Department's federal student aid programs," Kristen Donoughue, FSA's chief enforcement officer, wrote in the blog. "In addition, borrowers subject to such misrepresentations or fraud could be entitled to a discharge of their student loans, and the offending schools could be liable to repay those funds."
Insider previously spoke to a veteran who was targeted by aggressive recruiting tactics by a for-profit school, pushing her to take on student debt she could not afford.
"I served during 9/11, and it's frustrating that the university recruited us and then wouldn't take our GI benefits," she said. "It's very manipulative."
Along with this latest enforcement action, the Education Department has also acted to improve the borrower defense to repayment process, which are claims borrowers can file if they believe they were defrauded by the school they attended. If approved, they would receive loan forgiveness. To date, it has approved about $11.4 billion in relief for students who attended major for-profit chains including ITT Technical Institute and Corinthian Colleges.
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