Betsy DeVos Caused A For-Profit College Meltdown and Now She’s Doing Nothing for the Students
Trump Secretary of Education Betsy DeVos owns the ongoing, awful meltdown of the chains of career colleges — the Art Institutes, Argosy University, and South University — formerly operated by for-profit Education Management Corporation. Yet now, as campuses across the country have devolved into chaos, faculty and staff have lost their jobs, and students are left, short-term, lacking money for necessities like rent, and long-term with their futures in doubt, the DeVos Department is doing little to assist students. The Department isn’t even providing students with basic information.
DeVos’s conduct, and that of her subordinates, notably Acting Under Secretary Diane Auer Jones, a former for-profit college lobbyist, constitute dereliction of duty and malfeasance, and a complete disgrace.
Prior to Trump and DeVos coming to power, EDMC, many of whose programs offered quality instruction, devolved through a series of greedy and unethical owners and CEOs — including Goldman Sachs, Jeffrey Leeds, and Todd Nelson — into a predatory operation that deceived, coerced, overcharged, and under-educated students, while taking billions in taxpayer dollars. Ultimately, federal and state law enforcement went after EDMC, resulting in a settlement that did not come close to making students whole or adequately penalizing the company and its executives, but at least created concrete accountability mechanisms.
Everything DeVos, Jones, and their team have done have made the situation worse. They have worked to dump the various Obama-era regulations aimed at curbing predatory college operations and protecting students. They re-instated ACICS, the country’s worst college accreditor, which had turned a blind eye to bad behavior at for-profit schools, including some EDMC schools. They approved a wave of bogus conversions of for-profit colleges to non-profit status, and tentatively approved the conversion to non-profit of the EDMC schools after they were acquired by a new non-profit group, Dream Center Education Holdings (DCEH).
Despite all these malevolent, anti-student DeVos efforts, a number of predatory for-profit college chains have collapsed in the past year under the weight of their bad deeds and mismanagement. But the DeVos actions have helped keep other bad schools in business, continuing to enroll students even as you read this, depositing their hard-earned dollars, along with the federal aid that all our tax dollars provide, for weak, expensive programs that will ruin the financial futures of veterans, single moms, immigrants, and others seeking a better future.
As Republic Report has detailed in articles since last May, non-profit DCEH appeared to be seeking to leverage its operation of the former EDMC schools to provide revenue to for-profit schools — including Woz U and Southern Careers Institute — and other businesses tied to DCEH CEO Brent Richardson, his family members, and his long-time associates. In addition to this blatant but concealed conflict of interest, and other misdeeds, DCEH falsely told students that some of its campuses remained accredited, when in fact its accreditor had suspended that status.
Ignoring these shady dealings, the DeVos Department tried to smooth the way for DCEH. According to a source close to DCEH management, the DeVos Department officials directed DCEH to misstate its suspended accreditation status. DeVos’s team also changed a regulation to make it possible for some DCEH schools to have their accreditation restored retroactively. And it pushed DCEH to keep some campuses open, perhaps so the Department wouldn’t have to deal with the claims of students entitled to loan cancellation if their schools close.
When DCEH struggled, the DeVos-Jones team took another bad turn. Jones started listening to Michael Lau, CEO of hedge fund Candlewood Investment Group, which held much of the schools’ debt, and it decided to push the transfer of some DCEH schools to the unknown Education Principle Foundation (EPF). As Republic Report revealed last month, EPF is in fact a creature of Colbeck Capital Management, a Wall Street firm also tied to Studio Enterprise, the company slated under the Jones-brokered deal to reap taxpayer money by providing services to the EPF-owned schools, as well as the schools still owned by DCEH.
The DeVos Department did nothing to inform the public of this equally blatant and hidden conflict of interest and abuse of non-profit status by Colbeck.
The Department also stood by as DCEH used a trumped-up lawsuit to convince a federal judge in Cleveland to appoint its chosen candidate as a federal receiver for DCEH; receivership allows DCEH protection from its many creditors — such as landlords, law firms, and lead generation companies — while avoiding bankruptcy, which would automatically end its eligibility for the federal student grants and loans that represent most of its revenue. Needing to account for millions in missing money, the DCEH receiver, Marc Dottore, has publicly accused Studio Enterprise of taking a big cut of the federal money without providing any services.
Meanwhile faculty are writing to me about campuses falling apart, with mass layoffs, with security guards and maintenance staff gone from their posts. Students are telling me and reporters across the country that they are broke and deeply worried.
There’s a name for this kind of show, and it rhymes with “hit show.”
The DCEH crisis has been building for almost a year, became public with Republic Report articles last May, intensified when DCEH announced the closure of numerous campuses last summer, and now gets worse by the day. Has the DeVos Department of Education ever posted online an information page for Art Institutes, Argosy, or South students? Has Betsy DeVos, Diane Jones, or any other top official ever met with any of the students? Have they actually worked to increase positive options for students at closing or failing campuses? Have they ever bothered to inform taxpayers of who now owns and profits from schools that still get hundreds of millions of our taxpayer dollars? Have they acted to prevent our money from being siphoned to improper beneficiaries?
No evidence of any of that.
This is a scandal, and DeVos and Jones should resign.
UPDATE 02-15-19 6:30 pm: Senator Dick Durbin (D-IL) and Rep. Rosa DeLauro (D-CT) late today sent a letter to the Department of Education’s acting Inspector General, Sandra Bruce (whom the DeVos Department tried to replace earlier this month before backing off) asking questions regarding, for starters, recent reporting that some $9 million in federal student aid dollars sent to DCEH schools has gone missing. Durbin and DeLauro ask Bruce to investigate matters including: the Department’s handling of the EDMC-DCEH deal; the Department’s handling of DCEH’s misrepresentation of the accreditation status of campuses; the Department’s role in the EPF / Studio deal; potential conflicts of interest with respect to the various players in this saga; and the status of the missing student funds and other federal aid flowing to these schools. DeLauro is the chair of the House Appropriations Subcommittee that oversees, among other agencies, the Department of Education. Durbin is the Democratic Whip, the second highest ranking Senate Democrat.