NAICU Washington Update

Obama Administration Creates Student Aid Enforcement Unit

February 11, 2016

As part of the his budget proposal, President Obama announced plans to establish an Enforcement Office at the Department of Education to provide increased vigilance and quicker action in fighting fraud in the student aid programs.

In the announcement, Acting Secretary of Education John King, Jr., stated: “…schools looking to cheat students and taxpayers will be held accountable.” 

The new enforcement unit will be headed by Robert Kaye, formerly a lawyer at the Federal Trade Commission where he worked on consumer protection.  He will report to Jim Runcie, the Chief Operating Officer of the Office of Federal Student Aid.

The new unit will include four divisions: 

  1. An investigations unit that will identify misconduct or high-risk activity by higher education institutions. 
  2. A Borrower Defense Group that will provide legal analysis and support in analyzing claims by borrowers that they have been harmed by an institution and should have their loans forgiven.  (See Regulatory Efforts Underway to Expand Coverage for Borrower Defenses, January 26, 2016)
  3. The Administrative Actions and Appeals Service Group will impose administrative actions such as emergency, termination, limitation, suspension, or fine actions. It will also resolve appeals by program participants concerning final audit and final program review determinations. 
  4. The Clery Group will ensure compliance with the Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act.

The Enforcement Office will have a new group of 50 employees including some from existing units at the Department.  It will also employ lawyers equipped for such work as issuing subpoenas, to carry out increased legal strategies in its work. 

The Administration requested $13.6 million for the Enforcement Office, part of its request for $1.6 billion to administer student aid programs. That overall request is $80.1 million over last year’s request, primarily due to increased loan servicing costs. The Department plans to proceed with the development of the office regardless of whether it receives the funding.

In another effort to rein in abuse in the student aid programs, the Administration has proposed to restore the restriction on the share of a for-profit institution’s revenues derived from student aid from 90 percent to 85percent. In addition to reducing the percentage, the Administration’s proposal would include all federal student education benefits, such as those from the Veterans’ Department, in the calculation.  Such a change cannot be enacted without Congressional consent, which is unlikely.

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