U.S. Department of Education Announces New Program to Crack Down on Predatory Student Loans

Posted on March 29, 2023 at 3:51pm by

The U.S. Department of Education recently announced plans to use a “secret shopping” program aimed at better protecting student borrowers and cracking down on postsecondary institutions deemed to be low-performing or predatory in lending practices. This aims to build on the current administration’s stated commitment to improve federal student loan programs.

Detailed in a recent news release, the DOA’s plan calls for the Enforcement Office of Federal Student Aid (FSA) to monitor compliance with existing laws and regulations related to participation in all federal student aid programs.

In retail terms, companies often employ “secret shoppers” to pose as a customer in order to evaluate the quality of service. The FSA will be tasked with evaluating recruitment, enrollment, financial aid, and other practices of lending offices in an effort to identify potentially deceptive or predatory practices related to intake and approval of student loan applications.

“Secret shopping is another tool in FSA’s toolbox as we expand our oversight work to hold predatory schools accountable,” FSA Chief Operating Officer Richard Cordray said in the release. “Our focus — as always — is to ensure that students, borrowers, families, and taxpayers are not being preyed upon to make a quick buck.”

Student loans are a frequent concern for consumers seeking out options to alleviate financial instability. According to the National Consumer Law Center, “[s]tudent loans are dischargeable in bankruptcy only because of undue hardship, and current bankruptcy court practice has made such discharges difficult to obtain while being overly intrusive in requiring personal information from the debtor.”

In addition, relief on payments dating back to the COVID-19 pandemic have either expired or could be repealed at any point.

While still awaiting final word on all future payment requirements related to federal student aid, the FSA will remain focused on ongoing investigations or reviews or possibly opening new ones based on the secret shopper program. Individuals with loans from institutions found to be engaging in misconduct or outright fraud could have additional legal options open up related to relief or discharge.

For example, the DOE increased oversight efforts in October 2021, and results included the approval of group discharges based on borrower defense findings, providing approximately $11.4 billion in relief to 875,000 students who attended Corinthian Colleges, Inc., ITT Tech, Marinello Schools of Beauty, and Westwood College.

If you have a question about personal debt, including student loan obligations, and would like to hear more about bankruptcy options, contact Sader Law Firm today at (816) 561-1818 to speak with one of our experienced attorneys and receive a free consultation on your specific situation.