Education Department Appoints Special Master to Inform Debt Relief Process

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Education Department Appoints Special Master to Inform Debt Relief Process

Special Master will advise on borrower defense issues and creating a debt relief process that is efficient, transparent, and fair for students and taxpayers.
June 25, 2015

As a next step to provide students who attended Corinthian Colleges the debt relief they are entitled to, Under Secretary Ted Mitchell announced today that he has appointed Joseph A. Smith, a distinguished advocate for consumers and taxpayers, as a Special Master to guide a fair, efficient process.

In addition to advising the Department on issues related to Corinthian, Smith will help develop a broader system to aid students at other institutions who are seeking debt relief of their federal Direct Loans because they believe they were defrauded.

"The Department's aim is to make the process of forgiving loans efficient, transparent, and fair—and to ensure students receive every penny of relief they are entitled to under law," said U.S. Education Under Secretary Ted Mitchell. "This is uncharted territory for the Department, and we are glad that Mr. Smith will be helping us. He brings tremendous experience to this process, and is committed to working on behalf of students. He will be critical to helping us develop a broader system that will support students at other institutions who believe they have a defense to repayment."

Although Smith will not have the ultimate decision-making authority in granting debt relief to Corinthian students he will report to the Under Secretary and advise on the following areas:

  • Creating a simple application for debt relief for all borrowers applying for loan forgiveness.
  • Making recommendations on issues of law and fact related to borrower defense claims received by the Department.
  • Strengthening the process by which the Department can recover money from schools after successful borrower defense claims.

Smith will regularly communicate about the process with students, stakeholders, and the public at large, as he and the Department work through the process of evaluating claims. Smith will issue a report at the end of the summer, which will summarize his initial findings and advice to the Department.

Smith has extensive experience specializing in the independent oversight of complex financial services settlements. In 2012, he was appointed by a bipartisan group of state attorneys general, the federal government and the nation's five largest mortgage servicers to monitor the National Mortgage Settlement, the largest consumer financial protection settlement in U.S. history. In 2013, Smith was appointed to monitor the consumer relief obligations included in the $13 billion settlement between the U.S. Department of Justice and JPMorgan Chase.

"Throughout my career in financial services regulation, I have worked to protect the interests of both consumers and taxpayers. That is why it is an honor and a privilege for me to work with the Department of Education on this matter, where I will extend that commitment to protect students as well. In all my work, disclosure and communication have been critical to gaining public trust," said Smith. "I look forward to hearing from stakeholders, including students, those who represent them, attorneys general and the public as this process moves forward."

Under the Obama Administration, the Department of Education has taken has taken unprecedented steps to hold career colleges accountable for giving students what they deserve—a high-quality, affordable education that prepares them for their careers—including:

  • Establishing new student aid rules to protect students and taxpayers and ensure students receive an education that leads to good job prospects.
  • Strengthening oversight and compliance through inter-agency and Department teams focused on monitoring for-profit institutions.
  • Creating options that make student debt more manageable for borrowers, through flexible repayment options such as the Pay As You Earn plan, which caps student loan payments at 10 percent of a borrower's discretionary income.
  • Protecting military service members, veterans and their families from predatory actions by for-profit colleges.
  • Providing families with clear information to make a smart college choice, by providing a wealth of consumer tools designed to help students and families decide which college is right for them.