Senator Carper Seeks Information on VA Efforts to Assist Veterans Harmed by Closure of For-Profit Colleges

WASHINGTON – Today, U.S. Senator Tom Carper (D-Del.), top Democrat on the Senate Homeland Security and Governmental Affairs Committee, sent a letter to Department of Veterans Affairs (VA) Secretary Robert McDonald seeking information on the agency’s efforts to address the closure and bankruptcy of Corinthian Colleges, and specifically what the agency is doing to provide assistance to veterans who may have been harmed by using their Post 9/11 G.I. Bill educational benefits at Corinthian and other for-profit colleges that close.                       

“The bankruptcy and closing of Corinthian highlighted gaps in available protections for veterans and their families using the Post-9/11 GI Bill to complete their education,” Senator Carper wrote. “The VA has stated that it does not believe it has the authority to restore Post-9/11 GI Bill benefits in cases of school closures. This is concerning given the potential for veterans who attend closed schools to exhaust their benefits before they are able to complete their education.”

“Corinthian’s deceptive practices and the financial difficulties that led to its collapse are not unique and future school closures may put additional veterans at risk,” he continued. “Given the substantial investment the federal government makes in the Post-9/11 GI Bill, I believe that Congress has an obligation to ensure safeguards are in place to protect veterans who encounter these unfortunate situations. I also believe we may have a moral and fiscal obligation to ensure that veterans and their families are able to fully utilize the Post-9/11 GI Bill benefit to help them attain a high quality education.”

The text of the letter can be found below and in PDF form here.

Dear Secretary McDonald:

How are you, Mr. Secretary? I’m writing to you today to request information regarding the Department of Veterans Affairs’ (the VA’s) efforts to address the closure and bankruptcy of Corinthian Colleges, Inc. (Corinthian). Specifically, I seek to better understand how the VA provides assistance to veterans who may be harmed by using their Post 9/11 G.I. Bill educational benefits at schools that close.

Before going out of business, Corinthian operated several for-profit schools that enrolled 72,000 students who received approximately $1.4 billion in federal financial aid funds annually. In the winter of 2013, the U.S. Department of Education began investigating concerns about Corinthian’s job placement rates. In June 2014, the Department of Education placed the company on an increased level of financial oversight after the company failed to respond to repeated requests for information.Subsequently, Corinthian publically disclosed the extent of its financial problems and signaled that it may have to close.

To protect the interests of students and taxpayers by avoiding an abrupt shutdown, the Department of Education entered into an operating agreement in which Corinthian agreed to sell and prepare to wind down all of its programs. In February 2015, Corinthian sold more than 50 of its campuses to the Zenith Group, a subsidiary of the nonprofit Educational Credit Management Corporation. In April 2015, after confirming that colleges operated by Corinthian misrepresented job placement rates, the Department of Education also notified Corinthian of its intent to fine the company $30 million. On April 27, 2015, Corinthian announced it would immediately close its remaining 28 campuses and then filed for bankruptcy in May 2015.Approximately 13,500 students were enrolled at Corinthian’s locations at the time of its closure, and according to one report, 422 of these students were veterans.

The Department of Education also took steps to provide student loan relief to borrowers who were adversely affected by the bankruptcy and closing. First, the Department of Education identified 15,000 borrowers who were eligible for a “closed school discharge,” which allows borrowers who meet certain conditions to have the full balance of their outstanding federal student loans discharged when schools close. As of November 2015, the Department of Education reported that it had approved 5,814 closed school discharge applications, resulting in more than $75 million in relief to borrowers.Second, the Department of Education has also taken steps to provide relief to borrowers who attended Corinthian under its “borrower defense” provisions, which allow borrowers to seek loan forgiveness if they believe they were defrauded by their college under state law. As of December 2015, the Department of Education reported that it had approved 1,312 borrower defense claims, comprising nearly $28 million in relief to borrowers.

Unfortunately, the bankruptcy and closing of Corinthian highlighted gaps in available protections for veterans and their families using the Post-9/11 GI Bill to complete their education. The VA has stated that it does not believe it has the authority to restore Post-9/11 GI Bill benefits in cases of school closures. This is concerning given the potential for veterans who attend closed schools to exhaust their benefits before they are able to complete their education. For example, veterans who previously attended Corinthian may find that the credits they earned cannot be transferred to other schools, or the degrees or certificates they earned do not lead to meaningful employment.

As you know, Corinthian’s deceptive practices and the financial difficulties that led to its collapse are not unique and future school closures may put additional veterans at risk. For example, in January 2016, both Education and the Federal Trade Commission brought enforcement actions against DeVry University, based on allegations that it misled consumers about job placement and earnings potential.

Given the substantial investment the federal government makes in the Post-9/11 GI Bill, I believe that Congress has an obligation to ensure safeguards are in place to protect veterans who encounter these unfortunate situations. I also believe we may have a moral and fiscal obligation to ensure that veterans and their families are able to fully utilize the Post-9/11 GI Bill benefit to help them attain a high quality education. While it is important for students to carefully consider which educational programs will best meet their needs, it is also critical that the VA has effective measures in place to protect veterans when schools close.

I would be grateful if you could respond to the questions included in the enclosure to this letter by April 26, 2016. If you or any members of your staff have any questions about this request, please feel free to contact me personally. Thank you very much for your attention to this matter. All the best!

With best personal regards, I am

Sincerely yours, 

Tom Carper

Ranking Member