June 25, 2019

June 25, 2019

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June 24, 2019

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Student Loan Advocacy Group Pushes Department of Education to Increase Oversight of For-Profit Colleges and Contractors

The Student Borrower Protection Center (SBPC)—an organization established by former CFPB Student Loan Ombudsman Seth Frotman—recently published an article examining the Department of Education’s oversight of “lead generators.”  Lead generators are outside entities that help for-profit colleges manage “pre-enrollment activities” such as “recruiting and advising students,” “determining eligibility for federal aid,” and “delivering the Title IV funds.”  The article highlights state and FTC enforcement actions against lead generators and suggests that these entities qualify as third-party servicers under Department of Education regulations.

The article characterizes the Department of Education’s current oversight of the industry as “haphazard and wholly inadequate.”  It calls on the Department to (1) treat lead generators as third-party servicers, (2) require that schools disclose contracts with lead generators, and (3) compel lead generators to conduct annual compliance audits.

In addition, the article urges Congress and the Department’s Inspectors General to investigate why the Department has “failed to hold these lead generators and schools” accountable.  Finally, it asks that Congress amend the Higher Education Act to eliminate much of the Department’s discretion with regards to oversight of third-party servicing.

Institutions and third-party servicers are jointly and severally liable for a servicer’s violations of the Higher Education Act.  See 34 C.F.R. § 668.25(c)(3), (d)(2)(ii).  Thus, a decision by the Department of Education or Congress characterizing lead generators as third-party servicers would likely carry a significant compliance burden for both lead generators and contracting schools.

Copyright © by Ballard Spahr LLP

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About this Author

Alejandro Rettig y Martinez Litigation Attorney
Associate

Alejandro Rettig y Martinez is an associate in the Litigation Department. While in law school, Alejandro served as a student attorney for the Federal Criminal Justice Clinic, the only legal clinic in the country that exclusively represents indigent clients charged with federal felonies. He also worked for the U.S. Environmental Protection Agency in Chicago. After law school, Alejandro served as a law clerk for the Honorable Michael S. Kanne of the U.S. Court of Appeals for the Seventh Circuit.

Alejandro was a 2016 Ballard Spahr summer associate.

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