DeVos Embrace of Predatory For-Profit Colleges Is Breathtaking
Betsy DeVos, whose interest in education prior to the Trump administration seemed mostly focused on K-12 schools, has made her mark as Secretary of Education instead with a remarkably blatant embrace of the worst demands of the for-profit college industry.
The reputation of that industry, which at its peak a few years ago had 10 percent of U.S. college students and was getting as much as $32 billion a year from taxpayers in student grants and loans, was in tatters after a decade of government and media investigations exposing abusive practices by many for-profit schools: deceptive and coercive student recruiting, sky-high prices, low spending on instruction, and terrible job placement outcomes, leaving former students across America with crushing loan debt and often without the jobs they sought.
But instead of continuing the Obama Administration’s increasingly determined efforts to protect students and taxpayers by holding predatory for-profit schools accountable, which was beginning to push schools to improve their ethics and quality, DeVos, whose enormous wealth includes holdings in the for-profit college industry, has staffed up her department with people tied to troubled schools, trashed new Obama regulations, and undermined efforts to enforce existing law, giving predatory colleges a free pass.
With Trump crony New Gingrich actively pushing for the for-profit college industry, DeVos’s anti-reforms have accelerated in recent days. Her department has made new announcements nearly every week, actions that have dropped any pretense that DeVos might care about the college students the Department is charged with assisting.
DeVos has disgracefully turned her back on the hard-working Americans — veterans, single moms, immigrants, and others — who seek to improve their lives through career education programs that are supposed to train people for careers as nurse’s assistants, auto mechanics, computer technicians, and other jobs.
There have always been some honest, effective schools in the for-profit college sector. But many of those were taken over by unscrupulous Wall Street and private equity firms in the lax enforcement environment before the Obama reforms took hold. Ethical schools had a renewed chance to thrive in an emerging climate that rewarded quality. But the election to the presidency of the head of predatory Trump University, followed by DeVos’s blatant actions, threaten to rapidly provoke a new race to the bottom: With no accountability, predatory companies could again maximize profits by maximizing abuses of students.
Here’s what DeVos already has done to abandon protections for college students and for taxpayers:
DeVos has delayed and announced plans to rewrite two common-sense Obama administration rules that are aimed precisely at channeling federal aid to honest, effective career schools, rather than to the dishonest, low-quality ones. One, the gainful employment rule, would penalize career education programs that, year after year, leave graduates owing more in student loans than their income would allow them to repay. The other, the borrower defense rule, would: provide students defrauded or abused by their schools a process for having their federal loans cancelled, as the law already requires; prohibit schools from denying injured students the right to sue them; and place stronger requirements on financially irresponsible schools to put some cash aside in the event of collapse. Both rules, once implemented, would save taxpayers a lot of money, while helping students make better choices for their futures.
The for-profit college industry, opposing all accountability measures, relentlessly fought against these rules in a lobbying battle that stretched across almost the full eight years of the Obama presidency.
In July, speaking to the corporate front group the American Legislative Exchange Council, which has had many for-profit colleges as members, DeVos ratcheted up her previously polite criticism of the Obama rules, sneering at them as “textbook overreach… solely to advance their administration-wide war on every type of organization they didn’t like.” DeVos made false claims about the Obama measures along the way.
And last week, DeVos’s department offered for-profit colleges an extra seat at the table for upcoming negotiations on how to dismantle the Obama rules ― one seat for big for-profit schools, one for seat small for-profit schools. (Don’t let DeVos know she still has time to add a seat for “just right” for-profit schools.)
DeVos’s department also has stalled the process of deciding claims by students who say they were defrauded by schools that were approved by the Department for federal aid and thus should have their federal loans cancelled. It barely agreed to process the applications that already had been granted under the Obama administration. Meanwhile, thousands of broke former students hang by a thread, their financial futures unresolved.
DeVos announced a “stronger” ― but actually weaker ― approach to addressing school misconduct, which amounts to secretly asking offending schools to straighten up, rather than alerting the public to the abuses.
The administration also disbanded a multi-agency task force created under Obama to coordinate efforts to fight for-profit college abuses.
As if to illustrate the advent of this new lax approach to enforcement, DeVos gave for-profit Charlotte School of Law a new chance to take taxpayer money, after the Department of Education determined in December that the school, which had dismal bar passage rates, deceived its students and violated federal law. The Department at that time suspended federal student grants and loans, and the North Carolina attorney general opened an investigation. One day before DeVos was confirmed by the Senate, Charlotte Law had hired a DC lobbyist from the Podesta Group, Lauren Maddox, the same Lauren Maddox who (as Republic Report first reported back in January) worked to steer DeVos through her confirmation hearing.
DeVos also granted a reprieve — renewed access to federal aid — to former campuses of disgraced Globe University, campuses that Globe’s owner, the Myhre family, simply sold to another college chain it owns. DeVos’s department reversed a December 2016 decision by the Obama administration to block the transfer; the Obama team cut off federal aid to Globe after a Minnesota court found the company had engaged in fraud with respect to its criminal justice program. The fraud at Globe was blatant and destructive, yet DeVos chose to forgive.
As Politico reported last week in a detailed accounting of DeVos’s new approach to for-profit colleges, her Department also pushed back the deadline to find new accrediting agencies for colleges currently accredited by the discredited accreditor ACICS — which lost Department recognition last year due to its lax oversight of awful for-profit colleges.
And DeVos’s department sent a letter last week to the U.S. Consumer Financial Protection Bureau terminating the department’s agreements with the CFPB to share information about abuses against students. The hostile letter to another component of the federal government directly attacked the CFPB, claiming the bureau had breached the agreements and overstepped its powers. The CFPB has consistently worked to advance the interests of students against predatory scams, and DeVos’s rebuke and abandonment of cooperation is yet another a disgraceful move to put the interests of predatory schools and student lenders above those of students. In addition, federal law requires the Education Department and the CFPB to maintain such an agreement.
In order to implement this pro-predatory schools agenda, DeVos has brazenly filled key staff positions with people associated with predatory schools.
According to multiple Department career staff members, Robert Eitel, who previously worked for the predatory college companies Bridgepoint Education and Career Education Corp., and now is senior counsel to DeVos, is calling the shots on key issues related to for-profit colleges.
A number of senior career Department officials who were dedicated to protecting against for-profit abuses have resigned or are planning their departures, after having been cut out of decision-making and seen their important work undone. Among those who have left are Robert Kaye and Laura Kim, the top two officials of the Student Aid Enforcement Unit, established last year to root out violations of laws and regulations, and several key members of the Department’s office of general counsel.
Also leaving was James Runcie, who had been reappointed by then-Secretary of Education Arnie Duncan in 2015 to a second five year term as chief operating officer of the Office of Federal Student Aid. Runcie quit after DeVos ordered him to testify at a congressional hearing, and before he left he sent a stark memo to colleagues stating, “I am incredibly concerned about significant constraints being placed on our ability to allocate and prioritize resources, make decisions and deliver on the organization’s mission,” adding that he felt “encumbered from exercising my authorities to properly lead this great organization” and citing “the risk associated with the current environment at the Department.”
DeVos replaced Runcie with business executive A. Wayne Johnson, and Johnson in turn recruited to replace Robert Kaye in the critical job of the head of the Department’s enforcement unit ― in charge of investigating illegal conduct by schools ― Julian Schmoke, a college administrator who apparently has no investigative experience but previously worked at for-profit DeVry University, which has been under investigation by multiple law enforcement agencies and last year paid $100 million dollars to settle a Federal Trade Commission lawsuit charging that it deceived students. Schmoke was a graduate school classmate of Johnson’s. (Democratic Senators who had called on DeVos to replace Kaye with someone qualified to conduct investigations wrote to Schmoke Tuesday seeking to meet with him.)
That’s not all. The Trump/DeVos choice for the Department of Education general counsel job, Carlos Muñiz, is a corporate lawyer who has advised Career Education Corp. Muñiz previously worked as a top aide to Florida Attorney General Pam Bondi and helped to publicly defend her decision not to sue predatory Trump University. (While Bondi was publicly pondering whether to file such a suit, the Donald J. Trump Foundation sent an illegal $25,000 contribution to a pro-Bondi political committee.)
Early in the Administration DeVos also employed as an advisor Taylor Hansen, who previously worked as a lobbyist for the main for-profit college trade group, CECU.
Because DeVos seems to be signaling through these policy shifts and personnel moves that for-profit colleges can go back to the same kind of predatory practices that characterized the notorious sham “university” once run by DeVos’s boss Donald Trump, because she is basically giving for-profit colleges everything they want, the industry has even tamped down its enormous lobbying budget. But it does still have a lot of lobbyists, including a clearly influential pair of former congressmen.
Indeed, one could fairly ask whether Betsy DeVos is the one in charge of the federal government’s career education agenda, or whether instead it’s being run by Newt Gingrich and his sidekick Steve Gunderson.
Gunderson, a Republican former congressman from Wisconsin, has for six years been the head of the for-profit college trade association CECU. He also may be the luckiest man in the world.
Gunderson pursued a strategy of all-out confrontation with the Obama administration, spending heavily to fight any and all reform efforts. That strategy utterly failed; it provoked media and congressional investigations exposing wrongdoing and shortcomings at for-profit colleges, sending school enrollments and company stock prices into a tailspin, increasingly pushing the Obama Administration is enact reforms and increase enforcement, and ultimately convincing many for-profit colleges, large and small, to leave the trade group.
But the surprise election of Donald Trump turned Gunderson’s fortunes upside down. Not only was the head of predatory Trump University now the U.S. President, but also Gunderson could benefit because his long-time friend and ally Newt Gingrich, the former House speaker, was an early Trump supporter.
Long ago, you see, Gunderson had hired for his congressional office a hometown young woman named Callista Bisek, now Mrs. Gingrich. Once Gunderson became the head of the trade association in 2012, Gingrich became a paid advocate for Gunderson’s industry.
With Trump’s coming to power, Gingrich has now taken on an even larger role pushing the for-profit college industry’s agenda. (We wouldn’t know that from federal lobbying disclosure forms because Gingrich has never registered as a lobbyist for any of the corporate special interests whose arguments he’s been paid to peddle; instead, Gingrich has claimed his role to be, among other things “historian.”)
Last November, Gingrich tweeted, “Betsy DeVos will be great Secretary of Education,” and he spoke at the same ALEC conference this summer where DeVos attacked the Obama regulations.
The Trump-Gingrich-Gunderson connection, more than any other factor, may explain the wholesale adoption by DeVos’s department of the industry’s agenda.
Not content to have everything going his way at DeVos’s department, last week Gunderson couldn’t help but offer a remarkable falsehood to an Inside Higher Ed reporter covering DeVos’s shift in enforcement policy. Pretending that the Obama administration ignored efforts by colleges to report fraud against students, Gunderson whined, “We brought evidence to the previous administration of debt-relief scam groups misleading students. We asked for more oversight and enforcement on this. We were ignored.”
In reality, the Department was not ignoring evidence that shady companies were deceptively offering dubious student debt relief services; I know, because before Gunderson raised these concerns last year, I already had brought the Department and other agencies information about the same scams, and found them engaged on the issue. Gunderson knows the same, because at the time he praised their actions, writing in a June 14, 2016, letter to then-Secretary of Education John King, Federal Trade Commission chair Edith Ramirez, and CFPB director Richard Cordray, regarding the debt relief scams, “We recognize and applaud the efforts made so far in 2016 by your agencies and state attorneys general.”
Worse, Gunderson’s condemnation of these student debt scams appears to have been a means to an end — part of his effort to derail the pending borrower defense rule. He wrote in the same letter, “No such regulation can be seriously considered until the Administration and its colleague Attorneys General provide a safe environment for both students and schools to operate without such scams.” That Gunderson apparently did not bother to alert the Department to deceptions against students by many of the schools who were part of his own organization — Corinthian, ITT, ATI, FastTrain, and many more — shows his true motivations, and underscores his total lack of credibility.
To underscore the wholesale corruption at work here, Gunderson also has been friendly for decades with the wealthy Myhre family, owners of the deceptive, predatory Globe University — the people to whom DeVos’s department granted a special reprieve to keep getting your tax dollars. (Check out the Myhre family homes in Florida, and Minnesota.) Again not content with his victory, Gunderson claimed to Inside Higher Ed that the Myhres run “a good school” that fell prey to an Obama “ideological vendetta” — even though the Obama administration acted to cut off Globe’s funding only after a Minnesota court, following trial, concluded that the school had engaged in fraud. Opposition to fraud is not, whatever Gunderson says, an ideology.
In sum, DeVos, pushed by Gingrich, has overseen a breathtaking handover of policy to a predatory special interest. She has taken nearly every step imaginable to declare that her Department won’t be hassling for-profit colleges to comply with the law, or to otherwise avoid ripping off students and taxpayers.
DeVos and Gingrich hold themselves out as conservatives, but how it can be seen as conservative to ignore the enormous waste, fraud, and abuse of a for-profit college industry that gets nearly 90 percent of its revenue from taxpayers? How can Trump, who claimed that as president he would drain the corrupt swamp in Washington and fight for the forgotten man and woman, for America’s “inner cities,” and our veterans, allow DeVos to implement policies whose victims, at the hands of special interests, are those very people?
In truth, this is the swampiest of swampy administrations, blatantly corrupted by wealthy, dishonest industries, of which predatory for-profit colleges are the quintessence.
Fortunately, continued media exposure of industry abuses, and investigations and actions by law enforcement agencies, can help alert prospective students to bad-behaving schools and deter unlawful behavior. For example, the State of North Carolina shut down Charlotte Law just as DeVos was trying to prop it up. Eighteen state attorneys general sued DeVos for refusing to enforce the borrower defense rule, and six of the AGs, worried that DeVos would not defend aggressively against a lawsuit brought by accreditor ACICS to restore its recognition, convinced a federal judge to let them intervene in the case. And, as Republic Report first reported, the Securities and Exchange Commission last month rejected a proposed settlement reached between its staff and Kevin Modany, CEO of the awful predatory for-profit ITT Tech, almost certainly on the grounds that the proposal did not hold Modany sufficiently accountable, a concern that key Democratic senators had raised in a letter to the SEC.
DeVos’s swampy embrace of the taxpayer-supported predatory for-profit college industry will do an enormous amount of harm to students, while lining the pockets of the worst kind of crooks. But it won’t stop the principled effort by journalists, law enforcement, members of Congress, advocacy groups, and students themselves to highlight the truth and help steer students toward good quality, honest schools, the ones that can truly change their lives for the better. In the long run, DeVos’s stance against hard-working students will only discredit her, President Trump, and the predatory schools they are aiding.
This article also appears on HuffPost.