The Obama Administration Is Preparing For More College Shutdowns

"We're working hard on contingency plans," says a top Education Department official.

The Obama administration is preparing for more colleges to be forced to shut down, a top Education Department official says, as the watchdog that oversees much of the for-profit college industry is pushed out of business.

"We're working hard on contingency plans about more school closures," Ted Mitchell, the undersecretary of education, told BuzzFeed News. "We want to be able to reach out directly to students immediately, help to secure student records and offer teach-out plans. And we're working with states so that they can help too."

The Education Department is moving to shutter the Accrediting Council for Independent Colleges and Schools, an agency it has long trusted to control the flow of federal financial aid to colleges. If ACICS loses its government recognition, the colleges it oversees will have 18 months to find a new accreditor. If they can't find one willing to give them the tick of approval, they will lose access to the federal student loan system — a virtual death sentence for most for-profit colleges.

The government seems confident that the process will weed out the industry's weakest schools and leave the good ones standing. "The schools worthy of accreditation won't be clocked out by the calendar," Mitchell assured, saying the department has been reaching out to other accreditors for months in hopes of helping colleges make the transition.

But most other accreditors have higher standards, and will likely be wary of sheltering too many schools formerly covered by the scandal-prone ACICS. The accreditor has overseen a number of controversial for-profit schools, including two large chains that have collapsed under the pressure of government investigations.

Those collapses are already keeping the authorities busy. Earlier this month, Senator Elizabeth Warren stirred outrage by revealing the Education Department was sending its debt collectors after some 80,000 former students at Corinthian Colleges — students who would likely be eligible to have their loans forgiven because of fraud. More than 30,000 of those students could be having their social security income or wages garnished to pay the loans.

The Education Department has so far required Corinthian students who want their loans forgiven to submit applications. But tens of thousands seem to have no idea that is even a possibility.

Mitchell said the department's hands are tied when it comes to those borrowers. "We're upset too that some students find themselves in collections," he said. But "we can’t write off student loans in the same way that a private company can. Those loans stay on the books for a very long time."

Mitchell admitted the department has struggled so far with getting information to students who should be eligible for a discharge. "We want to get information out to borrowers.... It's proving very difficult."

Even bringing in student loan servicers to help communicate with borrowers, something many advocates have pointed to, may not work with Corinthian students. The vast majority of students who are in default on their loans — as many as 95% — haven't spoken to their loan servicers in 6 months, Mitchell said.

The department is "taking all the good ideas" when it comes to figuring out how to get information to Corinthian borrowers, Mitchell said. "There's always more than can be done."

The Industry That Was Crushed By The Obama Administration