Biden Extends Moratorium on Student Debt Collection; Dept. of Ed. Staff Expose DeVos Policies that Favor For-Profit College Sector

The Biden Department of Education has already begun taking action on higher education policy.

On Student Loan Debt Collection

First, there is positive news for student loan borrowers. As one of his first-day—January 20, 2021—executive orders, President Joseph Biden extended former President Trump’s moratorium on demanding federal student loan repayments through September 30, 2021.

The Washington Post‘s Danielle Douglas-Gabriel reports: “Following a request from President Biden, the Education Department said Wednesday it would extend the suspension of federal student loan payments through Sept. 30. The move arrives days before the moratorium is set to expire at the end of this month.  It makes good on Biden’s pledge to give borrowers some breathing room as the economy struggles to find its footing…  (T)he acting secretary of education said the agency would extend the pause on federal student loan payments and collections and keep the interest rate at 0 percent… With the extension, all borrowers with student loans from the Education Department will see their payments automatically suspended until Sept. 30 without penalty or accrual of interest. Each month until then will still count toward loan forgiveness for borrowers in public-service jobs. It will also count toward student loan rehabilitation, a federal program that erases a default from a person’s credit report after nine consecutive payments.”

Biden’s executive action extending the moratorium on student loan debt collection applies only to government loans but not to the private companies that make loans to student borrowers. In a follow-up report, Douglas-Gabriel explains the differences in the debt-collection procedures of the Department and the private lenders: “Private companies don’t have the power of the federal government to seize tax refunds, wages and Social Security benefits to repay defaulted debt.  Instead, they must file a lawsuit and get a court judgement. Lenders and creditors, if successful in court, can then garnish a person’s wages or seize their assets.” These companies undertake court action, and many are continuing to do so despite the economic recession caused by the pandemic. Douglas-Gabriel quotes a Maryland state legislator, explaining that borrowers in the private student-loan sector tend to be students whose economic situation is particularly fragile: “Borrowers only take out private student loans as a last resort when their federal options are gone… They are among the most economically vulnerable students in higher education and have very few protections.”

Department Staff Confront the Ways Education Secretary DeVos Favored For-Profit Colleges and Trade Schools at the Expense of Their Students

Education Department’s OIG Investigates Diane Auer Jones

The U.S. Department of Education has the enormous responsibility to regulate the large for-profit sector of colleges and trade schools. Betsy DeVos, however, has repeatedly favored for-profit higher education institutions themselves at the expense of their vulnerable students who have in too many cases been saddled with enormous debt and a worthless degree.

The Department of Education has considerable leverage over the for-profit higher education sector, because these institutions depend for their very existence on federal grants and loans.  In her book on the politics of higher education, Degrees of Inequality, Cornell University’s Suzanne Mettler explains: “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)

Now, even before Michael Cardona, Biden’s choice for Education Secretary, is confirmed, news is emerging about serious concerns from inside the Department about the DeVos department’s favoring for-profit colleges. Politico‘s Michael Stratford reports on a leaked preliminary investigation from the Department of Education’s Office of Inspector General of Diane Auer Jones, who is accused of “taking actions that ‘were outside the authority’ granted to her as the principal deputy undersecretary of education.” Stratford explains: “A top adviser to former Education Secretary Betsy DeVos exceeded her authority when she helped struggling for-profit colleges access hundreds of millions of dollars of federal money… A 10-page summary of the findings obtained by POLITICO describes failures in how the Trump administration approved and oversaw business deals involving three for-profit college chains. They operated dozens of campuses across the country under the brands Argosy University, South University and the Art Institutes. The years long saga over the purchase of the schools by Dream Center Educational Holdings, and their subsequent collapse, has already produced a slew of legal fights… The preliminary findings criticize the Trump administration over how it initially approved the deal and failed to impose tighter oversight on the colleges despite the ‘significance’ of the risks to students and taxpayers, including the fact that the new Dream Center owners had no experience in higher education. The inspector general found that department officials, sometimes in unprecedented actions, allowed millions of dollars to flow to the colleges—even as many of the campuses descended into further financial distress and ran into accreditation problems.”

Stratford continues: “The inspector general’s preliminary report describes how Jones negotiated and helped orchestrate the swift sale of four recently acquired Dream Center schools to yet another owner, the Education Principle Foundation. It says that Jones ‘negotiated and agreed to the conditions’ under which those colleges could continue to receive federal student loans and Pell Grants. The result, according to the preliminary report, was that the Education Department allowed four colleges to receive more than $200 million over a nine-month period in 2019 even though those institutions ‘should have been deemed ineligible’ for federal student aid during that time… The Trump administration’s handling of the Dream Center situation came as part of a broader push by the DeVos-led Education Department to deregulate the for-profit college industry.”

Back in June of 2019, the NY Times Erica Green profiled Diane Auer Jones, who served in the Department of Education during the George W. Bush administration and subsequently worked as a lobbyist against regulation of  the for-profit higher education sector. In mid-2019,, Green described Jones’ work in the DeVos Department of Education: “Now, as the chief architect of Education Secretary Betsy DeVos’s higher education agenda, Ms. Jones is leading the charge to overhaul the accreditation system, and, to critics, revive the fortunes of for-profit organizations that operate low-quality education programs… The fact that Ms. Jones went on to work for some of those institutions after she resigned (from the Bush administration) has made her perhaps the most controversial appointee at the Education Department.”

Education Department Staffers Demand Severing of Ties to Controversial College Accrediting Agency

Late on Friday, only two days after President Biden was inaugurated, the Washington Post‘s Danielle Douglas-Gabriel reported that career staffers are demanding the termination of the Department’s ties to the Accrediting Council for Independent Colleges and Schools, which is known to have accredited shady for-profit trade schools and colleges:

“A controversial accreditation agency backed by former education secretary Betsy DVos may soon be stripped of its power to act as the gatekeeper for billions of dollars of federal financial aid.  Career staffers at the Education Department are recommending that the Accrediting Council for Independent Colleges and Schools, or ACICS, lose the federal recognition needed to operate. In a report made public Friday, staffers concluded that the oversight body, which mostly accredits for-profit colleges, had failed to meet federal standards… An independent advisory board will take the recommendation into consideration when it convenes next month to decide the council’s fate… If the advisory board votes that the government should withdraw its recognition, the accrediting agency can appeal to the education secretary. If the secretary adopts the recommendation to terminate the agency, about 73 schools will have 18 months to find a new accreditation agency to continue receiving federal financial aid.”

Douglas-Gabriel quotes Rep. Bobby Scott (D-VA), the chairman of the House Education Committee, commenting of the significance of Friday’s recommendation by Department of Education staff to terminate ties with ACICS: “When predatory institutions are given the legitimacy of accreditation, they use it to collect billions of dollars in federal student aid while denying students the education they deserve.”

The Real Reason Betsy DeVos Tried to Fire Her Own Department’s Inspector General

Betsy DeVos is back in the news.  She recently tried to fire the U.S. Department of Education’s Acting Inspector General, Sandra Bruce, and replace her with Phil Rosenfelt, who has been serving as the Department of Education’s General Council. Democrats in Congress criticized the nomination of Rosenfelt because the Office of Inspector General in any federal department is supposed to be an objective watchdog—independent from the operation and policies of the department it oversees.

When Democrats raised concerns, DeVos backtracked and reinstated Sandra Bruce in her old job.

Early in February, the Washington Post’s Laura Meckler explained: “The White House backed down Friday from plans to install a longtime Education Department official as the agency’s acting inspector general following an outcry from congressional Democrats… President Trump had already signed papers designating Philip H. Rosenfelt, a career lawyer who works in the Education Department’s general-council office, as acting inspector general. The move was never officially announced, but Education Department leaders notified the inspector general’s office and lawmakers that it was official.” Congressional Democratic leaders had formally complained: “The conflicts or appearances of conflict are a result of Mr. Rosenfelt’s prior work in the Department’s Office of General Council, which has a role implementing virtually all programs that the inspector general investigates…”

Now, however, it turns out that DeVos’s motive for trying to fire Sandra Bruce was far more suspicious than just an attempt to hire someone who would protect the pet projects of the Department. It looks as though DeVos tried to fire Sandra Bruce because, as part of her job as Inspector General, Bruce was investigating DeVos’s reinstatement last November of Departmental approval for a shady accrediting agency of for-profit colleges, the Accrediting Council for Independent Colleges and Schools (ACICS). Late in 2015, The Obama Department of Education had removed approval of ACICS as a federal accreditor of for-profit colleges.

A brief review…

Why does federal accreditation of for-profit colleges matter?  For-profit colleges and trade schools depend for almost all of their operating revenue on federal grants and loans and the G.I Bill, but in order to receive federal loans and grants, a for-profit college must be accredited by a government-approved accrediting agency.

You will remember that two enormous for-profit colleges—Corinthian Colleges (in 2015) and ITT Technical Institutes (in 2016)— suddenly shut down, leaving their students without an education and with lingering debt.  The shutdowns occurred after the Obama Department of Education determined they were insolvent and denied them access to future federal loans and grants. The Accrediting Council for Independent Colleges and Schools (ACICS) had accredited these institutions, however, despite that ACICS knew they were teetering on the edge of bankruptcy. As a result of its failure to perform its responsibility as an accreditor, the Obama Department of Education stripped ACICS of federal approval to serve as an accreditor on behalf of the federal government.

However, as the Washington Post‘s Laura Meckler reported, last November DeVos reinstated ACICS: “Education Secretary Betsy DeVos… restored federal recognition to a controversial agency that accredits for-profit colleges, reversing an Obama administration decision to put it out of business. The move is one in a number of steps DeVos has taken to undo an Obama-era crackdown that she argues unfairly targeted for-profit schools for scrutiny not applied to other colleges. But critics say she is propping up an industry with a record of misleading students….”

How does the threatened firing of the Department of Education’s Acting Inspector General connect with the reinstatement of ACICS as an approved accreditor of for-profit colleges?

On Tuesday—day before yesterday—NBC News‘s Heidi Przybyla reported: “House and Senate Democrats say they have obtained evidence that a senior official at the Department of Education tried to oust the department’s independent watchdog after she (Sandra Bruce) pushed back on an attempt to intervene in an active investigation of Secretary Betsy DeVos. Lawmakers from four House and Senate committees who oversee the department sent a letter to DeVos on Tuesday suggesting that the effort to replace the department’s acting inspector general, Sandra Bruce, had been related to her duties in overseeing the probe of DeVos’s decision to reinstate ACICS, an accreditor that had been stripped of its certification by the Obama administration.” Przybyla continues describing Congressional leaders’ concerns, according to Chair of the House Education Committee, Rep. Bobby Scott: “In this case, Scott cites a letter dated Jan. 3, obtained from Education Department deputy secretary Mitchell Zais to Bruce.  In the letter, Zais wrote that he found it ‘disturbing’ Bruce was proceeding with the probe of ACICS and ‘asked (her) to reconsider any plan’ to review the department’s decision to restore its accreditation.”

Przybyla continues: “Bruce, Scott said, then ‘communicated her plans to continue’ the investigation and ‘underscored the importance of maintaining independence from the department.’  A few weeks later, Zais notified Bruce that she would be removed from the position.”

Describing a pattern of suspected interference by Trump officials with the work of the departmental Inspector Generals, Przybyla comments: “The exchange between Zais and Bruce as described in Scott’s letter underscores a concern expressed across a number of federal agencies—that the Trump administration is attempting to blur what are supposed to be clear lines between Cabinet officials and the independent investigative arms that exist to police their policies, conduct and use of taxpayer dollars.”

Michael Stratford also covered the story this week for POLITICO: “Congressional Democrats said Tuesday they have uncovered evidence that the Trump administration tried to influence an internal watchdog’s investigation of Education Secretary Betsy DeVos.  Five top House and Senate Democrats said that the Trump administration sought to remove the Education Department’s acting inspector general last month after she pushed back on a request to ‘reconsider’ her investigation into DeVos’ move to reinstate a controversial accreditor of for-profit colleges… The lawmakers asked DeVos to turn over more documents relating to the decision to install a new acting inspector general as well as communications between political appointees and the Office of the Inspector General…. They asked the Education Department to provide the records and other information by March 5.”

Advocates for the rights of military Veterans weigh in…

In a stunning NY Times opinion piece on Monday of this week, two Veterans’ advocates, James Schmeling of Student Veterans of America and Carrie Wofford of Veterans Education Success condemn DeVos’s policies to deregulate for-profit colleges.  These schools, they explain, take advantage of vulnerable student Veterans who can pay tuition with money from the G.I Bill: “Despite robust objections from roughly three dozen national Veterans and military service organizations, Secretary DeVos elected to eviscerate student protections and quality controls for colleges—particularly those governing the often low-quality, predatory for-profit colleges that target Veterans in their marketing schemes… Why are Veterans the targets?… Hundreds of for-profit schools are almost entirely dependent on federal revenue… Taxpayers, in other words, are largely propping up otherwise failing schools… Overall, by 2017, for-profit colleges had vacuumed up nearly 40 percent of all G.I. Bill tuition and fee payments since the post-9/11 G.I. Bill was introduced.  Eight of the 10 schools receiving the most G.I. Bill subsidies since 2009 are for-profit colleges. Six of those 10 have faced government legal action for defrauding students.”

Schmelling and Wofford name specific policies in which DeVos’s department has rolled back regulation of the for-profit college sector: “Ms. DeVos has largely delegated policymaking and enforcement to members of the for-profit college industry, who are now her aides… The fox is running the henhouse.  Ms. DeVos fought and is now stalling defrauded students’ right to recourse under the Borrower Defense rule, and she eliminated a rule requiring career colleges to prove their graduates can get a job, even after being officially warned by the department’s Office of Inspector General that the rule was necessary to protect taxpayer funds.”

Schmelling and Wofford conclude: “The Education Department’s Office of Inspector General, following the V.A.’s lead, conducted an investigation of Ms. DeVos after she reinstated the Accrediting Council for Independent Colleges and Schools, or ACICS, which had been discredited.  Career civil servants on her own staff had determined that ACICS had failed to meet 57 of 93 basic federal quality standards—including its inadequate oversite of the now-defunct, Veteran-hungry schools, ITT Technical Institutes and Corinthian Colleges. Both were for-profits whose bankruptcies left countless Veteran students with deep debt and rubbish degrees.”

It is easy to understand why Betsy DeVos would want to replace Sandra Bruce, the Education Department’s Acting Inspector General who has been investigating the performance of her boss—Betsy DeVos.  One can only hope that pressure from the leaders of key Congressional committees along with pressure from Veterans’ agencies might motivate the President to replace Betsy DeVos herself.

DeVos Again Protects For-Profit Colleges and Federal Loan Servicing Contractor at Expense of Vulnerable Students

Betsy DeVos once announced: “Government really sucks.”  She doesn’t like government regulation, and she prefers to free up the marketplace.  One of the best places to observe her penchant for deregulation is in higher education, where she has regularly done everything she can to protect the investors in for-profit colleges and trade schools, where she has tried to step back from protecting students with federal loans, and where she has done little to oversee the giant government contractors who process federal student loans. Over the years, the issue of government regulation of these practices has been understood as necessary because almost all the money that props up the too-often-unscrupulous, for-profit colleges comes from the government, and because millions of students who borrow in good faith end up with huge debts run up for programs that have left them unemployable.

In her 2014 book, Degrees of Inequality: How the Politics of Higher Education Sabotaged the American Dream, Cornell University professor Suzanne Mettler tells us why we should worry about DeVos’s relaxing regulation of the for-profit higher education sector:  “Defenders of for-profit universities champion them as belonging to the private sector, but in recent years as in the past, they receive nearly all of their revenues from the U.S. federal government… 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. The Apollo Group, owner of the University of Phoenix, gained between 85 and 88 percent of income from these sources in each of the past three years. Most received an additional 2 to 5 percent from military educational programs, including the Post-9/11 GI Bill…  In short, the for-profit schools are almost entirely subsidized by government.” (Degrees of Inequality, p. 168)

DeVos loses one battle on “Borrowers’ Defense to Repayment”

Earlier this fall, court challenges successfully blocked Betsy DeVos’s attempt to relax Obama-era rules designed to protect student borrowers. DeVos had attempted for over a year to delay imposition of a rule called “borrowers’ defense to repayment.” She had intended to replace it with her own more lenient regulation.  In mid-October, DeVos lost her bid to replace and weaken this regulation.  Michael Stratford reported for POLITICO: “A federal court cleared the way for Obama-era student loan borrower protections to take effect, handing a defeat to Education Secretary Betsy DeVos after she fought for more than a year to stop the rules.” The Obama-era rule, now in effect after the court challenge, protects students’ rights to petition to have their loans forgiven if they are able to prove their college knowingly deceived them about its programming or if, like Corinthian Colleges and ITT Technical Institute, the college suddenly shuts down.  It also permits students who believe they have been defrauded to join together in class action lawsuits to have their debts forgiven.

DeVos Rescues Federal For-Profit College Accreditor Deemed Ineffective and Denied Standing During Obama Years

But despite her one failure to vanquish “borrowers’ defense to repayment,” DeVos persists in her attempt to protect the for-profit colleges, the loan servicing companies, and their investors.  The first of her recent actions was reinstating an agency whose role has been accrediting or denying accreditation to for-profit colleges, which cannot qualify to receive federal grants and loans unless they are accredited by a Department-approved agency. The Obama Department of Education had cracked down. The Washington Post‘s Laura Meckler explains: “In December 2016, the Obama administration ruled that the Accrediting Council for Independent Colleges and Schools, known as ACICS, should no longer be allowed to serve as a gatekeeper between colleges and billions of dollars in federal financial aid. It concluded that the agency was incapable of rectifying years of lax oversight and ‘exhibited a profound lack of compliance’ with the ‘most basic’ responsibilities of an accreditor.”

ACICS was the agency that maintained accreditation for Corinthan Colleges and ITT Tech until the day they went under.  Inside Higher Education‘s Andrew Kreighbaum reports that many of the other institutions it once accredited were so shaky that they have shut down or now teeter on the edge: “The accreditor oversaw 245 colleges as of 2016.  But roughly 70 ACICS institutions who receive Title IV funds haven’t yet found recognition from another accreditor… And the largest chain of schools still overseen by the accreditor, Education Corporation of America, looks to be facing serious questions about its financial viability.”

DeVos left her decision up to Diane Auer Jones, a principal deputy undersecretary at the Department of Education.  Auer Jones once served as a senior vice president at Career Education, which operates for-profit colleges.  Meckler reports that last year career staff in the Department of Education conducted a review of ACICS and uncovered 57 findings of noncompliance, but it is not clear whether this review was considered in Auer Jones’ decision to reinstate ACICS.  ACICS, of course, claims it has corrected past practices.

Department of Education Refuses to Force Its Contractor for Loan Processing—Navient—to Disclose Cheaper Repayment Options to Student Borrowers

In a stunning expose, the Associated Press‘s Ken Sweet reports: “One of the nation’s largest student loan servicing companies may have driven tens of thousands of borrowers struggling with their debts into higher-cost repayment plans.  That’s the finding of a Department of Education audit of practices at Navient Corp., the nation’s third-largest student loan servicing company.”

The problem has arisen when students encounter financial problems and need to restructure their payment schedules. In a 2017 audit, the Department of Education discovered that Navient had boosted profits by “steering some borrowers into high-cost plans without discussing options that would have been less costly in the long run.” While the Department of Education uncovered the problem in its own 2017 audit, federal officials did not share the results of its investigation with plaintiffs in lawsuits filed against Navient in five states by student borrowers.

Here is how the review was conducted: “As part of their inquiry, DoE auditors listened in on about 2,400 randomly selected calls to borrowers from 2014-2017 out of a batch of 219,000.  On nearly one out of 10 of the calls examined, the Navient representative did not mention other options, including one type of plan that estimates the size of a monthly payment the borrower can afford based on their income.  Auditors wrote that many customer service representatives failed to ask questions to determine if such a plan known as an income-driven repayment plan might be more beneficial to the borrower.”

Sweet reports: “Navient disputed the audit’s conclusions…One point the company makes in its defense is that its contract with the education department doesn’t require its customer service representatives to mention all options available to the borrower.” “‘We are not aware of any requirement that borrowers receive all of their repayment options… on each and every call,’ the company said, adding that if the Department of Education chose to require all servicers to discuss income-driven repayment plans with all borrowers, the Department of Education needs to redo its contract with Navient.” Navient points out that its greatest business expense is paying its customer service agents.  The company’s profits depend on hiring the smallest possible number of service agents,.

Sweet describes Seth Frotman who quit in disgust last August as the highest-ranking Department of Education official in charge of student loans. Frotman  believes Betsy DeVos’s Department of Education’s refusal to push back against Navient’s practices is “outrageous.”  Frotman says, “In short, Navient, when confronted with evidence of its bad practices, is telling the government, ‘Pay us more money or take a hike.’  And it looks like the Department of Education took a hike.”

Rep. Bobby Scott (D-VA) is expected to become the Chairman of the U.S. House of Representatives Committee on Education and the Workforce. Scott commented last week on Betsy DeVos’s decision to reinstate the ineffective Accrediting Council for Independent Colleges and Schools. But his comment also more broadly describes the the entire hands-off approach of Betsy DeVos’s Department of Education to regulating for-profit higher education in the public interest: “This decision will expose hardworking people across the country, including many service members and veterans, to schools that routinely leave students with crippling debt, non-transferable credits and no degree, while leaving taxpayers to foot the bill.”