When colleges defraud students, should the government go after school executives?

Advocates say the Education Department has an obligation to hold school leaders liable.

In a shocking investigation, the U.S. Senate declared the federal student loan program “plagued by fraud and abuse.” Its report heaped scorn on for-profit trade schools for serving 22% of federal student loan borrowers but accounting for 44% of defaults.

“The school keeps the student aid money … and the student is left holding the bag with a poor credit rating, no job and no income to repay the student loan,” U.S. Rep. Marge Roukema, R-N.J., declaimed in her crusade against for-profit “bad apples.”

Sound familiar?

This clamor for accountability erupted back in 1991, more than two decades before the epic collapses of Corinthian Colleges and ITT Technical Institute cost students and taxpayers millions of dollars in wasted loans and worthless degrees. More recently, in February, the U.S. Department of Education announced it would erase more than $70 million in student loans for former DeVry University students who had been misled by the school’s false advertising.

Believe it or not, back in 1992, in response to all this hand-wringing about for-profit colleges, Congress gave the education secretary a nuclear option: the power to hold leaders of fraudulent colleges — including executives and investors — personally liable for their wreckage. The problem is that 30 years later, the department has yet to use that power.

Now, some lawmakers, higher education experts and department officials argue: It’s time.

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