While the Press Covers the Police Killing of a Black Man, Riots, and the Pandemic, Trump Quietly Vetoes Rule to Protect Defrauded Student Borrowers

On Saturday morning, the Washington Post‘s Matt Zapotosky and Isaac Stanley-Becker began their coverage of the state of our nation: “A global pandemic has now killed more than 100,000 Americans and left 40 million unemployed in its wake. Protests — some of them violent — have once again erupted in spots across the country over police killings of black Americans. President Trump, meanwhile, is waging a war against Twitter, attacking his political rivals, criticizing a voting practice he himself uses and suggesting that looters could be shot… Together, the events present a grim tableau of a nation in crisis — one seared by violence against its citizens, plagued by a deadly disease that remains uncontained and rattled by a devastating blow to its economy.”

Few reporters noticed something that President Trump did on Friday under the cover of all the news Zapotosky and Stanley-Becker summarize.  By comparison it seems like a small thing, but it will have a devastating effect on many of the same vulnerable people who have lost jobs due to the pandemic.  On Friday, President Trump vetoed a joint congressional resolution, passed by bipartisan majorities in both chambers of Congress, to overturn Betsy DeVos’s re-write of the “borrower defense to repayment” rule. Trump’s veto will make it much harder for students defrauded by unscrupulous for-profit colleges to force the federal government to forgive their federal college debts. It seems unlikely that Congress will have enough votes to override Trump’s veto.

The Obama era “borrower defense to repayment” rule made it easier for student borrowers with federal student loans to have their loans forgiven if they had been defrauded. However, an enormous backlog of claims has been building since DeVos took over the department and her staff slowed processing of students’ claims. Finally, last September, DeVos’s department rewrote a new version of the rule more friendly to the for-profit colleges and less protective of defrauded student borrowers burdened with enormous debt.

Anger and disagreement has swirled around the “borrower defense to repayment” rule. The Washington Post‘s Danielle Douglas-Gabriel reports that the President’s veto on Friday, “arrives two months after Congress agreed to scrap DeVos’s overhaul of a 1995 law known as ‘borrower defense to repayment.’ The law provides federal loan forgiveness to students whose colleges lied to get them to enroll. An Obama-era update of the statute lowered hurdles for students and shifted more of the cost onto schools but DeVos tried to scuttle the update and then rewrite the rule. The Trump administration finalized its rewrite in September, which limits the time borrowers have to apply for relief and requires them to prove they were harmed financially by the deception. The rule is scheduled to take effect July 1.”

The New York TimesErica Green explains how DeVos’s rule will make loan forgiveness far more difficult: “Even if some borrowers can show they were victims of unscrupulous universities, they could be denied relief unless then can prove their earnings have been adversely affected…  Ms. DeVos’s changes raised the bar for borrower relief claims, requiring applicants to individually prove that a school knowingly misled them and, even if students were bilked, that they were financially harmed by the deception. They also set a three-year deadline on claims.”

The number of such borrowers skyrocketed when several for-profit institutions were shut down. Douglas-Gabriel reports: “The closure of Corinthian Colleges and ITT Technical Institute, for-profit chains felled by charges of fraud and predatory lending, resulted in a deluge of claims at the Education Department. Claims continue to mount as other for-profit colleges including Argosy University and the Art Institutes, have folded. The Education Department has received more than 300,000 claims for debt relief to date.”

Throughout her tenure, DeVos has been protective of for-profit colleges and trade schools, dependent for much of their operating budgets on government loans. While some of these institutions have promised programs that will eventually yield fabulous jobs, too often they have left their students unemployed and severely in debt.  Because the for-profit colleges have preyed particularly on military veterans who can bring additional G.I. Bill dollars to their coffers, veterans groups have opposed DeVos’s rewrite of the “borrower defense to repayment’ rule.  Veterans’ groups had pressed President Trump not to veto Congressional action to block DeVos’s new rule. Politico‘s Michael Stratford reports: “Veterans groups lobbied furiously to get Trump to sign the measure… In a statement on Friday before the veto, James ‘Bill’ Oxford, the national commander of the American Legion, said that the group was ‘hoping that President Trump will once again come to the aid of student veterans,’ and that DeVos’s rule made it ‘nearly impossible for veterans to successfully’ obtain loan forgiveness if they were deceived by a school.”

It is easy to miss one of the important issues at play in the debate about college debt and the for-profit higher education sector.  For-profit colleges and trade schools raise over two-thirds of their revenue from federal grants and loans. In her book on the politics of higher education, Degrees of Inequality, Cornell University’s Suzanne Mettler explains how funding for the for-profit colleges and trade schools works: “Notably, these institutions, with only one exception, earned between 60.8 and 85.9 percent of their total revenues in 2010 from Title IV of the Higher Education Act, meaning predominantly student loans and Pell grants… Most received an additional 2 to 5 percent from military educational programs, including the Post-9/11 GI Bill. The sum of these federal government funds added up, as a portion of all revenues collected, to a minimum of 65.8 percent for ITT and a maximum of 93.7 percent for Bridgepoint.  In short, the for-profit schools are almost entirely subsidized by government.” (Degrees of Inequality, p. 168)

And yet, Politico‘s Stratford reports that DeVos claims she wants to save the government money by refusing to erase the debts of students who have been have defrauded: “The Education Department estimated that the stricter rules will reduce loan forgiveness by hundreds of millions of dollars each year, compared with the Obama era policy, saving taxpayers more than $11 billion over the next decade.”

DeVos says one goal of her new rule is to save money, but DeVos has expressed no intention of regulating the for-profit college sector whose very operation is underwritten largely by the federal government.  At the same time, the Trump administration refuses to protect the students themselves—the victims of shoddy operations, fraud, false advertising, and even the sudden closure of the institutions in which they were enrolled—from debts that will in many cases ruin their financial futures.

2 thoughts on “While the Press Covers the Police Killing of a Black Man, Riots, and the Pandemic, Trump Quietly Vetoes Rule to Protect Defrauded Student Borrowers

  1. Jan – I hope that you continue to be healthy and safe.  I just shared your post with several of my friends and indicated to them that it will take more than 100 years to undue all of the detrimental things this guy who lives in public housing in Washington, DC has done. Thanks for staying on the front lines. Sia Barbara

  2. Jan – These actions by DeVos and the President come as no surprise. I believe there is a growing sentiment that we are watching accelerating negative responses to a failing society. I wonder what defnition the architects of current economic policy have for the concept of society. It appears that their definition(s) do not include the use of any measures of gross national well-being or life quality.
    Keep up the great work.

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