Elizabeth Warren Pans Education Department For Drawn-Out Debt Relief Process

The Obama administration is under fire after canceling student loans for just 1 percent of thousands of eligible borrowers.

Sen. Elizabeth Warren (D-Mass.) on Friday slammed the Obama administration for imposing unnecessary roadblocks on allegedly defrauded for-profit college students eligible for debt cancellations, joining other prominent lawmakers and consumer groups urging Education Secretary Arne Duncan to stop prolonging distress for swindled student debtors.

The rebuke comes as Duncan prepares to leave office this month amid persistent questions about the U.S. Department of Education’s shoddy oversight of dodgy colleges. During his roughly seven-year term, Duncan presided over a doubling of outstanding national student debt to $1.3 trillion, as well as the largest failure of a college chain in U.S. history.

Earlier this week, consumer groups and lawmakers including Sens. Dick Durbin (D-Ill.) and Richard Blumenthal (D-Conn.) criticized the Education Department for dragging its feet after it announced Thursday that only 1 percent of the roughly 125,000 eligible student debtors who attended schools owned by defunct for-profit chain Corinthian Colleges Inc. would actually see relief -- even though the department had previously acknowledged those students were likely defrauded. The department said it will cancel $27.8 million in federal student loans owed by some 1,300 former Corinthian students after concluding they were cheated into taking on the debt as a result of Corinthian allegedly falsifying its advertised job placement rates.

In October, a federal judge in Chicago ruled that Corinthian had violated federal law by using false job placement rates from 2011 to 2014 to deceive more than 115,000 former students into taking on student loans.

“Students shouldn’t need to wait or jump through more hoops to verify information that the department already knows,” Warren said in a statement to The Huffington Post. “The evidence of Corinthian’s fraud is massive and overwhelming -- students were cheated, and [the Education Department] should immediately relieve the debt as allowed by the law.”

Incoming Education Secretary John B. King Jr. said in November that the department’s goal “is to ensure that every eligible student receives every penny of the debt relief they are entitled to as efficiently and easily as possible.”

But the department’s actions to date have caused some to doubt King’s promise, as consumer advocates and Warren question the Education Department’s outreach to student borrowers it has already said were likely defrauded by Corinthian.

Duncan said in July that he was “thrilled to be able to close down” Corinthian. The company filed for bankruptcy in May in the largest failure of a college chain in U.S. history.

Fewer than 5,400 former Corinthian students had petitioned the Education Department as of Nov. 18 to cancel their debts based on Corinthian’s alleged frauds, the department said Thursday. That compares to about 125,000 former Corinthian students the department has previously said were likely defrauded by the college chain.

About 6,700 borrowers in total have filed applications with the Education Department to discharge their debt. By comparison, Massachusetts Attorney General Maura Healey on Nov. 30 sent Duncan some 2,700 pages of confidential evidence from her investigation into Corinthian’s alleged frauds, along with attestations from former Corinthian students, to support claims for 7,200 allegedly defrauded Corinthian borrowers from her state alone.

Americans for Financial Reform, a consumer group launched in the wake of the financial crisis to advocate for stronger Wall Street regulation, described the Education Department’s outreach to likely defrauded borrowers as “vastly insufficient.”

Denise Horn, a department spokeswoman, said the Education Department had contacted student borrowers via email and would continue in its efforts, including posting information on the department’s website.

As an example of its outreach to borrowers, the department said in September that it had sent a single email in July to more than 50,000 former Corinthian students about their potential eligibility for fraud-linked debt relief.

Horn didn’t answer repeated questions as to whether the department’s loan contractors, which are receiving $804 million in pay this year to interact with borrowers and collect their monthly payments, are actively informing former Corinthian students about their eligibility for debt relief, or whether they’re cashing monthly checks received from otherwise defrauded borrowers.

The Education Department’s limited actions “may leave hundreds of thousands of students burdened with debts foisted on them by deceptive and abusive practices,” AFR said.

"It’s the Department of Education’s responsibility to protect every student -- not a lucky few," said Sen. Chris Murphy (D-Conn.). "So while their decision to provide relief to 1,300 students is a good start, it’s not enough. There are tens of thousands of other students across this country who, under the law, are entitled to this same relief."