DeVos

Education Secretary Betsy DeVos is making decisions that will impact millions of young people for decades to come — even freshmen students starting their first semester. While DeVos’ recent decision to roll back former President Barack Obama’s Title IX rules on campus sexual assault has been roundly criticized, other policy changes in DeVos’ agency have been ushered in with little fanfare and scant coverage.

When given a choice to side with student debt servicers or with students themselves, Secretary DeVos sides with debt servicers every time. It’s worth noting that prior to become Secretary of Education, DeVos was financially invested in a firm that financed a nine-figure loan to a debt collection agency which contracts with the Department of Education (ED).

Here are five things DeVos is quietly doing to bankrupt student borrowers for the benefit of a few shady companies:

1. DeVos gave student debt profiteers high-profile positions in her agency

45* isn’t the only person in the administration who has made a point of giving people jobs heading the very agencies they’ve been actively undermining for years. Secretary DeVos is making a laughingstock of positions in ED created to fight on behalf of students.

In August, DeVos tapped Julian Schmoke (yes, that’s his real name), a former dean of the for-profit DeVry University, to head her agency’s fraud enforcement office. This is particularly shameful, as DeVry has been fighting allegations of defrauding students with deceptive marketing, and giving federal regulators fraudulent data. In 2016, the school’s parent company reached a $100 million settlement with the Federal Trade Commission in response to the allegations.

Earlier this year, DeVos hired financial services executive A. Wayne Johnson to head the Federal Student Aid office. Prior to joining ED, Johnson headed Reunion Financial Services, which handles private student loans. In his new position, Johnson is in charge of ED’s $1.3 trillion student debt operation, the disbursement of Pell grants, and regulation of public colleges and universities.

In addition to Johnson and Schmoke, two other student debt profiteers have influential positions within DeVos’ agency. Robert Eitel, who was the top lawyer for Bridgepoint Education — the parent company of several for-profit colleges — is a senior advisor within the Department of Education. The New York Times reported in March that Eitel’s former employer paid out a $30 million settlement in regard to deceptive student lending practices. And Carlos Muñiz, who is general counsel for ED, is an attorney who has done “consulting services” on behalf of for-profit Career Education Corporation, which is under multiple state investigations, according to Politico.

2. DeVos shut down programs meant to help students scammed by for-profit colleges

One action former President Barack Obama’s Department of Education took to help students rooked by for-profit colleges was creating the “Borrower Defense Rule,” which forgives loans students took on to get educated at fraudulent institutions like Corinthian Colleges. Secretary DeVos ended up scrapping the rule just before it was set to take effect, prompting 18 state attorneys general to sue her, saying there was $32 billion in taxpayer money tied up in the institutions affected by the rule. DeVos killed the rule without allowing for any public comment prior to her decision.

Additionally, the administration has killed an interagency task force assembled during Obama’s second term to crack down on abuse at for-profit colleges and foster cooperation between federal regulators and state attorneys general. The task force was dismantled despite no major enforcement actions from the body itself.

3. DeVos refused relief applications for scam victims

DeVos kicking the Borrower Defense Rule to the curb is really just scratching the surface of her obeisance to student debt profiteers, and the administration’s willingness to use bureaucracy against defrauded students seeking relief.

In July, the Associated Press reported that since 45’s inauguration, there have been literally zero approvals for students requesting loan forgiveness from colleges that have been found to be fraudulent, like Corinthian Colleges. While the Obama administration approved approximately 28,000 requests for relief, 45 did not approve any requests between January 20 and July. The AP also revealed that some of the thousands of requests for relief are for students who attended the school Julian Schmoke used to work for:

Overall, the department said there are more than 65,000 pending claims for relief. Although most come from Corinthian and ITT students, others are from people who attended schools that are still in operation, including DeVry University and the University of Phoenix.

45 has been president for almost eight months now, but there’s still not been any progress for defrauded students seeking debt relief. The AP reported last week that the administration is saying it will be at least another six months before it could approve any pending debt relief applications.

4. Shutting down the public service debt forgiveness program

Ever since the Bush administration, graduates who entered public service professions, like teachers, police officers, public defenders, and other career paths that typically pay far less than private sector jobs, would have their student debt forgiven after ten years of public service. The first 500,000 or so graduates who enrolled in the program at its inception may now suddenly be forced to pay off those loans anyway, if DeVos has her way.

In August, the Department of Education filed a motion for summary judgment in a lawsuit brought against the agency by the American Bar Association, which is accusing DeVos’ agency of changing its guidelines on which employers qualify for the program. According to NPR, ED’s lawyers argued that not only are the promises the agency made to borrowers “non-binding, individualized determinations,” but that forgiveness wouldn’t kick in until those 500,000 borrowers made ten years of monthly payments.

5. DeVos ended the Department of Education’s partnership with the Consumer Financial Protection Bureau

When the Consumer Financial Protection Bureau (CFPB) was created following the passage of the Dodd-Frank financial sector reform law, the agency was tasked with overseeing companies “servicing loans” and “collecting debt related to any consumer product or service.”

Student debt servicer Navient, which has a $300 billion portfolio of U.S. Department of Education loans, is currently being sued by the CFPB, which alleges the company has “illegally cheated borrowers out of repayment rights through shortcuts and deception.” In official court documents, Navient argued that it has the right to scam students, saying “there is no expectation that the servicer will act in the interest of the consumer.”

However, at the end of September, DeVos announced she would be ending her agency’s partnership with the CFPB, saying the bureau acted to “expand its jurisdiction into areas that Congress never envisioned” by providing oversight for servicers of ED loans. DeVos’ agency issued this memo in spite of not only legislation on the books that defines the CFPB’s role, but in spite of the fact that a 2014 report by the Government Accountability Office found that ED didn’t actually provide any oversight over the servicers of its own loans. The question still remains as to why DeVos made up a reason for separating her agency from the CFPB in matters of policing student debt servicers.

 

While DeVos’ actions are far-reaching and frightening, there’s an ongoing effort to fight back. Among other tactics, the group Strike Debt — which famously bought up and abolished roughly $4 million in distressed private student loan debt in 2014 — advocates for strategic debt strikes, in which students collectively decide to stop paying on all debt until the Department of Education agrees to come to the table to strike up a fair deal for borrowers.

If your loans are serviced through Navient, the pending lawsuit from the CFPB the company is fighting could yield some relief in the future. Call your member of Congress and both of your senators and tell them to resist all attempts to defund or hamstring the agency.

(*EDITOR’S NOTE: GritPost.com is now exclusively referring to Donald Trump as “45.” Please read our official statement on Twitter explaining the decision.)

 

Matthew P. Robbins is a freelance economics contributor covering wages, budgets, and taxes. He lives in Chicago, Illinois with his husband and two cats. 

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