Thank you all for being here today. Two decades ago, there was a surge in subprime mortgage lending in our country. Mortgage lenders dangled the American dream in front of people’s eyes, but many of those lenders knew that those borrowers would probably crash and burn.
The financial industry cashed in on fees and profited handsomely, even as they set up Americans to fail, and our economy went down in flames.
The devastation of the foreclosure crisis had visible wounds in cities, suburbs, and small towns across the country. Many homes were boarded up and local stores went out of business. But less discussed was the same subprime-style lending practices that were perpetrated by some of the nation’s largest chains of for-profit colleges.
Some of these companies also peddled the American dream to prospective students looking to climb the economic ladder, and improve the lives of their families.
But repeatedly, we saw some of those companies engaged in widespread deception, and structured complex loan arrangements that allowed them to harvest profits even as they set up borrowers to fail.
In some cases, these schools even targeted veterans and servicemembers to exploit loopholes that allowed them to collect more federal subsidies and push even more loans on their students.
Like those who faced foreclosure, many student borrowers would default, leading to crippling financial sanctions that made it tougher to get a job, tougher to get an apartment, and tougher to rebuild their lives. Their wounds were less visible, but still destructive.
I am extremely pleased that the Department of Education and its Office of Federal Student Aid have taken the appropriate legal steps to cancel the loans of those defrauded by ITT Tech.
While today’s action affects federal loans, and while past CFPB actions have addressed many of the private loans peddled by ITT, we will continue our work with the Department of Education and other regulators to open up the books on in-house institutional lending programs – these are private loans pushed directly by schools -- to ensure that they are not strongarming their students with illegal practices.
We hope that ongoing oversight will prevent further abuses like those found with ITT Tech, where students were subjected to high interest rates and illegal debt collection practices.
To conclude, I want to thank all of the borrowers who had the tenacity and courage to share their stories and to speak up to federal and state law enforcement, including many of whom I have heard from personally while I worked in a CFPB office devoted to student loan issues, while serving at the Department of Education, and now as Director. And unfortunately, too many individuals have told me that going to college was the worst decision they ever made in their lives. We count on stories, borrower complaints, and whistleblower tips to unearth trends and hold bad actors like ITT accountable.
But more broadly, we should not live in a country where bad actors exploit the desire to go to college, buy a home, or achieve the American Dream. And we will all continue to work to make sure that those who work hard can get ahead.