June 29, 2020

DeVos Tries Everything to Force Deceived Students to Repay Loans

DeVos Tries Everything to Force Deceived Students to Repay Loans

Betsy DeVos’s four-year immoral crusade to harm American education has included a thoroughly corrupt effort to protect predatory for-profit colleges and force students who were scammed by these schools to pay back their student loans anyway. Advocates for veterans, single mothers, immigrants, and others ripped off by for-profit colleges have been determined to fight back. There were numerous developments last week in this struggle, and they deserve our attention. 

The borrower defense rule override fails after Trump veto

— The House of Representatives voted 238 to 173 Friday in favor of overriding President Trump’s veto of a bipartisan resolution that would give students deceived by their schools a fair chance to have their federal loans cancelled — but the House tally was short of the two-thirds vote needed for override. 

The vote was the latest skirmish in a long struggle that began in the wake of the collapse of several awful for-profit college chains, including Corinthian Colleges and ITT Tech. After a long, careful regulatory process, the Obama Department of Education in 2016 issued the borrower defense rule, which created fair standards and procedures for former students to apply for loan discharges if their schools had deceived them about matters like costs of attending, job placement rates, starting salaries, and transferability of credits. The rule also prohibited colleges taking federal aid from using mandatory arbitration clauses to prevent students from suing them; only for-profit schools, or previously for-profit schools, were forcing these ripoff clauses on their enrollees. 

The regulation not only would have provided some financial hope and a measure of justice to broke, abused students; it also would have saved taxpayers billions over time by highlighting the worst-acting schools and motivating the Department of Education to push them out of the federal aid program.

That’s exactly why the for-profit college industry, which always seems focused on protecting its worst-offending schools, lobbied hard to stop the Obama-era rule, and it’s why, when Donald Trump and Betsy DeVos came to power, the industry made trashing the borrower defense rule a top priority.

The predatory colleges got their way: After a rigged rule-making process, engineered by top DeVos aide Diane Auer Jones, who is a former executive at predatory for-profit college operation Career Education Corp., the Department issued a revised rule that makes it virtually impossible for students to get their loans cancelled or to sue their schools.

The gutting of the borrower rule is one of many actions taken by DeVos and Jones to weaken accountability and oversight against predatory college abuses.

The Department’s explanation for why it was making it more difficult for students to prevail on loan discharge claims seemed premised on the notion that it was the students, not the schools, who were the scam artists — an assertion presented with no evidence at all.

The DeVos rule was a disgrace, so unfair that it triggered an amazing reaction. The resolution to overturn it, pushed with skill and determination by Senate Democratic Whip Dick Durbin (IL) and first-term representative Susie Lee (D-NV), earlier this year passed the House with the votes of all Democrats and six Republicans, and then passed the Senate with every Democrat and ten Republicans in favorten Republican senators voted to repudiate the Trump/DeVos rule and effectively restore the Obama-era rule.

Trump’s veto was offered in his usual cowardly way of announcing an ugly decision: late on a Friday.

The opposition in the House to the veto override last week was led by Rep. Virginia Foxx (R-NC), long the willing stooge of the for-profit college industry, whose campaign donations are a solid source of income for GOP election campaigns. Foxx claimed, “We want all schools to serve students well,” but her stance on the resolution belied that assertion. She said the DeVos rule “protects all student borrowers” and holds schools accountable. But the National Commander of the American Legion, James W. “Bill” Oxford, had written a letter saying the DeVos rule is “fundamentally rigged against defrauded borrowers of student loans.”

Although the bipartisan resolution did not survive Trump’s veto, it was a remarkable achievement. It was the first time Congress had voted to overturn a Trump administration regulation, and the first time Trump was forced to veto any resolution concerning domestic policy. 

It also was remarkable considering where Congress had once been on these issues. Less than a decade ago, for-profit college campaign cash and lobbying corrupted the votes of many Democratic members in Congress, as well as nearly every Republican member. Consider, for example, a 2011 vote in the House seeking to block the gainful employment rule, another key Obama measure aimed at protecting students from predatory schools: the vote was 289 to 136 in favor, with 58 Democrats joining in the anti-student effort. 

Now the Democrats in Congress stand solidly on the side of students and taxpayers in demanding accountability for waste, fraud, and abuse by predatory schools, and finally some Republicans seem to be moving in that direction, a position that any conservative not corrupted by campaign donations should embrace.

The change in Congress reflects the overwhelming evidence of abuses by many (not all) for-profit colleges, and the leadership of Democrats like Senators Durbin, Elizabeth Warren (MA), Patty Murray (WA), and Richard Blumenthal (CT), Representatives Lee, Maxine Waters (CA), Mark Takano (CA), the late Elijah Cummings (MD), and many others. It also reflects the determined efforts by advocacy groups fighting for veterans, students, consumers, and civil rights — and by the ripped-off students themselves.

The strength and vision of this powerful alliance — which also includes the attorneys general of many states — could make an even bigger difference on these issues if there is new leadership next year in the White House and in the Senate. 

Evidence mounts that DeVos has been acting in bad faith on debt relief claims

— While DeVos and her aide Jones have worked to gut the borrower defense rule to undermine future claims by defrauded students, new evidence emerged last week that they have been doing everything possible to reject already-pending borrower claims.

A report released Thursday by the House Committee on Education and Labor documents how DeVos abruptly halted the review of student claims started under Obama and refused to process even a single debt relief application for more than eighteen months. Worse, DeVos’s Department illegally pressed these claimants to pay back their loans, garnished their wages, and withheld their tax refunds. These illegal actions led a federal judge to hold DeVos in contempt and fine the Department $100,000. And when it did start processing claims, the DeVos Department applied an unfair, nonsensical “partial relief” approach aimed at reducing loan cancellation amounts.

When DeVos was forced to sign off on thousands of students’ loan cancellation claims that were already approved by the Department under Obama, she went out of her way to note that she was signing “with extreme displeasure.” This expression of antipathy toward abused students seems wholly consistent with the Secretary’s bitter 2017 remark that under the Obama borrower defense rule “all one had to do was raise his or her hands to be entitled to so-called free money.” 

The House report also shows that DeVos and Jones have repeatedly misled Congress on these issues.

The committee chair, Rep. Bobby Scott (D-VA), said in the statement, “{T]he Trump Administration’s approach to Borrower Defense has always been to provide as little relief as possible to as few borrowers as possible… {T]he Department delayed and denied relief for hundreds of thousands of people who are still in desperate need of help.”

— Supporting Rep. Scott’s accusation was the Tuesday revelation, in US News, that a Department of Education staffer has filed a whistleblower complaint alleging that DeVos aide Jones this month rejected a web portal designed by the Department’s Federal Student Aid office to facilitate borrower defense applications. According to the whistleblower, Jones rejected the website because it made applying for loan cancellation too easy.

A Department spokesman responded that the whistleblower is “lying.”

Student borrowers win a major court victory over DeVos

— In another major development that showed that the courts, as well as Congress, disapprove of the unlawful, anti-student efforts of DeVos and Jones, a federal judge on Friday ordered the Department of Education to cancel the student loans of all 7,200 former Corinthian Colleges students in Massachusetts. The company’s schools were shown through previous federal and state law enforcement proceedings to have systematically deceived and abused students, yet DeVos had failed to grant them debt relief. The decision was a huge victory for students, and a tribute to the outstanding work of their lawyers at the Harvard Project on Predatory Student Lending (for which — disclosure — I was previously a consultant) and to determined efforts for several years by Massachusetts attorney general Maura Healey, a powerful champion of students. 

As the Harvard Project has highlighted through its groundbreaking lawsuits, for-profit college abuses represent a profound racial justice issue. More than 75 percent of the Corinthian College students in Massachusetts were Black or Latinx, and more than 80 percent were women; many face overwhelming debt — tens of thousands of dollars owed for education programs that did little or nothing to advance their careers. (Meanwhile, most of the wealthy for-profit college executives and owners are white men.)

Despite this resounding court judgment, another 200,000 to 300,000 students loan borrowers, many of them low-income, remain waiting, desperately hoping to get their loans cancelled because of school misconduct. But DeVos and Jones seem determined to prevent most of them from getting any justice at all. 

DeVos announces new student loan servicers

— The clear record of disdain for students by DeVos and Jones makes one wary of the Department’s announcement Wednesday that it is awarding new student loan servicing contracts to five mid-size companies. As former Department of Education official Jon Oberg notes in a new blog post, some of these companies have troubling records, and, notably, two of the companies getting contracts are in the home states of Republican senators with power over education spending, Roy Blunt (MO) and Lamar Alexander (TN).

It’s also still unclear whether any of the “Big Four” loan service companies, all shut out of this announcement, will get a piece of this lucrative business down the road, either directly or as subcontractors. It’s possible the DeVos team wanted to underplay the future involvement of those companies, including PHEAA, which has been sued for abusing student loan borrowers by the attorneys general of New York and Massachusetts, and which has a revolving door relationship with the Department. Most recently, Kathleen A. Smith, formerly a top aide to DeVos and Jones at the Department, left in April 2019 to become PHEAA’s senior vice president and head of “federal relations.” 

Jon Oberg understands these matters pretty well. He blew the whistle on fraud by numerous student loan companies and won major legal battles against most of those, recovering more than $70 million for taxpayers. Oberg is prominently featured in an excellent new book by veteran journalist Dan Moldea, “Money, Politics, and Corruption in U.S. Higher Education: The Stories of Whistleblowers.” (Disclosure: I’ve worked with Oberg, and I’m also interviewed in Moldea’s book.)