Today, the U.S. Department of Education announced the establishment of an Office of Enforcement within Federal Student Aid, reporting directly to the chief operating officer. The Office of Enforcement will strengthen oversight of and enforcement actions against postsecondary schools that participate in the federal student loan, grant, and work-study programs. Today’s action restores an office that was first established in 2016, but deprioritized in the previous administration.
“Vigorously ensuring that schools are adhering to the federal student aid program rules and delivering quality education to students is critical in America’s ability to build back better,” said Under Secretary James Kvaal. “The Administration will prioritize Federal Student Aid’s effective oversight and enforcement of postsecondary schools.”
The Enforcement Office will be led by Kristen Donoghue, as the chief enforcement officer, who will report directly to FSA Chief Operating Officer Richard Cordray. Donoghue joined FSA in July as a senior advisor to the chief operating officer, bringing a wealth of enforcement and leadership experience. Donoghue previously served as the enforcement director of the Consumer Financial Protection Bureau (CFPB), where she led a 140-person office responsible for enforcement of federal consumer financial laws covering a range of financial services companies including the largest banks in the country.
Under her leadership, the CFPB pursued hundreds of investigations and filed numerous significant public enforcement actions, including obtaining the highest civil money penalty in the CFPB’s history, a $1 billion fine against Wells Fargo. Most recently, Donoghue served as a managing vice president at Capital One Bank, where she headed a team focused on legal and regulatory compliance.
“Kristen brings a strong enforcement track record to this role,” said Chief Operating Officer Richard Cordray. “Her experienced leadership will drive greater accountability for schools and better educational outcomes for the students we serve.”
The Enforcement Office will proactively identify and address major problems across institutions that pose widespread risks to students and taxpayers. The office will work closely with the Partner Participation and Oversight Office on a risk-based approach to oversight and compliance. It will comprise four existing divisions:
- Administrative Actions and Appeals Services Group: This group fines, limits, suspends, terminates, and imposes emergency actions against postsecondary institutions that participate in the federal student aid programs. The group also issues actions, such as revocations and recertification denials; initiates debarment and suspension proceedings against individuals and other parties; and resolves appeals of final audit and program review determinations.
- Borrower Defense Group: This group analyzes borrower defense to repayment claims and recommends appropriate dispositions to Department leadership. The group communicates with postsecondary institutions about borrower defense claims and coordinates across FSA and with investigative and enforcement divisions of federal and state agencies related to individual borrower defense claims.
- Investigations Group: This group evaluates indicators of potential misconduct or high-risk conduct by postsecondary institutions and third-party servicers, and investigates institutions’ compliance with federal laws, regulations, and the terms of program participation. This group will collaborate with other agencies that have complementary enforcement resources, such as the Department of Justice, Consumer Financial Protection Bureau, Federal Trade Commission, and state attorneys general.
- Resolution and Referral Management Group: This group tracks and resolves referrals, reports of suspicious activity, allegations, and complaints about institutions and individuals that participate in the federal student aid programs. FSA receives feedback from sources that include the general public; students; school officials; individuals within FSA and the Department; and external oversight and higher education stakeholders, such as the Department’s Office of Inspector General, U.S. Department of Defense, U.S. Department of Veterans Affairs, and Consumer Financial Protection Bureau.
As part of FSA’s heightened enforcement activities and actions to uphold civil law and promote borrower protection, FSA will coordinate with other state and federal partners. In particular, FSA plans to work closely with the Federal Trade Commission, which earlier this week announced a major shift in its enforcement priorities to focus on postsecondary schools that illegally engage in unfair and deceptive acts or practices.
“The Department of Education has critical oversight responsibilities over the integrity of the benefit and student loan programs under Title IV of the Higher Education Act,” said FTC Commissioner Rohit Chopra. “By working more closely together, FTC investigations can assist the Department of Education in taking additional administrative actions against those that violate the law.”
Today’s announcement follows actions the Biden-Harris Administration has taken to protect students and taxpayers from poor-performing programs, including:
- Approving 100% borrower defense discharge, totaling more than $556 million, for students harmed by ITT Institutes, Westwood College, Marinello Schools of Beauty, and the Court Reporting Institute.
- Revising the Department’s position on preemption of state oversight to foster closer coordination and joint action between FSA and state officials, which ensures stronger protections for fair treatment of students, parents, and borrowers.
- Resolving liabilities identified in program review and audit determination of postsecondary institutions, totaling more than $4.1 million.
- Denying the application of Florida Coastal School of Law to resume its participation in the federal student loan program.
- Initiating actions against school executives who failed to put students’ interests first. And,
- Elevating the FSA ombudsman to report to FSA’s chief operating officer to put more focus on the voice of the customer and FSA’s commitment to taking actionable steps to improve customers’ experiences and outcomes with the federal student aid programs.
This week, the Department held the first session of negotiated rulemaking sessions focused on college affordability and student loans. The rulemaking committee is expected to address issues affecting student loan borrowers, including borrower defense to repayment for students harmed by their colleges’ misleading practices, recovering from institutions the amount of relief granted to borrowers under a successful borrower defense claim, closed school discharge, and pre-dispute arbitration.