Durbin Statement on Department of Education's Proposed Mandatory Arbitration Ban
Durbin called for crack down on arbitration in early days of Corinthian collapse
[WASHINGTON, D.C.] – U.S. Senator Dick Durbin (D-IL) today made the following statement after the Department of Education released its latest proposal for new federal regulations on federal student loan relief for students who attended colleges or universities that engaged in unlawful, unfair, deceptive, or abusive practices. The proposal includes a provision that, if adopted in the rulemaking process, would effectively end the use of mandatory arbitration agreements by institutions of higher education that receives federal Title IV funding. For-profit colleges have long used mandatory arbitration clauses to shield themselves from accountability – forcing students into secretive dispute resolution proceedings that stack the deck against students and prevent systemic misconduct from coming to the attention of regulators.
“The Department of Education’s proposal to ban mandatory arbitration in enrollment agreements has the potential to be a game-changer for protecting students and taxpayers. If adopted, it would cement the Obama Administration’s legacy of putting students first,” said Durbin. “If Corinthian students had been able to take their complaints to court and seek compensation directly from the company, the Department may not be faced today with thousands of students seeking federal student loan relief at taxpayer expense.”
Durbin has long advocated banning the use of mandatory arbitration clauses in college enrollment contracts, a practice almost never used by not-for-profit schools. He first called for the Department to crack down on the practice in the immediate aftermath of the collapse of Corinthian as a condition of the Department approving the sale of Corinthian to ECMC. In April of last year he introduced the Court Legal Access and Student Support (CLASS Act) to ban the practice by all Title IV institutions and in a February 11 letter to the Department of Education with eight of his colleagues asked the Department to use its authority to act. That letter can be found HERE. Earlier this week, the number of supporting Senators grew to 35 on a letter calling for a ban.
An investigation by the Senate Committee on Health, Education, Labor, and Pensions found that of the twenty-seven enrollment agreements produced to the committee by for-profit education companies, twenty-one contained a clause that required students to go through a process of mandatory binding arbitration. Not only does forced arbitration hurt individual students who cannot obtain meaningful recourse directly from wrongdoers, but it also prompts those students to seek relief from the Department of Education through taxpayer dollars.
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