At U.S. House Education Committee Hearing, DeVos Defends Cheating Some Defrauded Students by Only Partially Forgiving Loans

There was a lot going on last week—Judiciary Committee hearings on articles of impeachment, for example. Did you miss learning about Education Secretary Betsy DeVos’s miserable performance before the U.S. House Education Committee?  As she defended her new “borrower defense to repayment” plan, DeVos didn’t seem to worry very much about the hundreds of thousands of students who have been defrauded by for-profit colleges, but she did seem to want to protect the reputation of the for-profit college sector.

DeVos was called before the committee to explain her department’s inexplicable failure to provide loan forgiveness for what DeVos herself said are “nearly 300,000 claims” by students who said they had been defrauded by their for-profit colleges. Many of the claims demanding loan forgiveness under what is called the “borrower defense to repayment” rule were filed by students at the now shut-down Corinthian Colleges and ITT Technical Institute.  Both were shut down because they had lured students to enroll (and take on enormous debt) with fraudulent promises about what would turn out to be shoddy career prep programs.

The Associated Press‘s Colin Binkley explains: “The program, known as borrower defense to repayment, is meant to forgive federal loans for students whose colleges misrepresent the quality of their education or otherwise commit fraud. It was expanded under the Obama administration to help clear loans for thousands of students who attended Corinthian Colleges, a for-profit college chain that collapsed in 2015 amid allegations that it lied about the success of its graduates in order to get students to enroll.  Soon after, thousands of additional claims were coming from students who attended other for-profit colleges, including defunct chains such as ITT Technical College. But after the Trump administration took office, the process ground to a halt. Loans were no longer being discharged, and a pool of 60,000 pending claims ballooned to more than 200,000.”

Not only have Betsy DeVos and her staff slowed loan processing on thousands of claims, but DeVos has devised a new plan to save the government money by denying full repayment to some students whose colleges closed—students who have become employed despite the shoddy programs that trained them and even though their college loans left them deeply in debt. Binkley explains: “Some Democrats believe DeVos intentionally stalled the program for more than a year while she rewrote the rules and made it more difficult for students to get loan relief… Earlier this week, DeVos unveiled a new method for judging claims that she says will help clear the backlog.  It’s meant to provide varying levels of loan forgiveness based on the degree of financial harm a student suffers.  Full forgiveness will be granted only to students from programs that produce graduates with median incomes far below their peers in other similar programs.  Other defrauded students can get 25% to 75% of their debt erased, depending on the median income of the program they attended.”

The NY TimesErica Green explains why DeVos opposes full debt forgiveness: “Ms. DeVos said her department’s overhaul of the debt-relief rule marked a ‘course correction’ from the previous administration, which she claimed ‘weaponized’ it to target for-profit colleges and award ‘blanket’ relief to borrowers who may not have deserved it. ‘I understand that some of you here just want to have blanket forgiveness for anyone who raises their hand and files a claim, but that simply is not right,’ Ms. DeVos told lawmakers… Ms. DeVos maintained that it was ‘probably the case’ that Corinthian Colleges deceived students, but she also said she believed that the ‘prior administration basically forced schools like Corinthian out of business’ with onerous financial restrictions.”

A bit of background is helpful here. The reason the Obama Department of Education began toughening enforcement of rules on for-profit colleges is that, according to Cornell University professor Suzanne Mettler, “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.” (Degrees of Inequality, p. 168)  While these colleges claim to be private, for-profit institutions, they depend for most of their revenue on our tax dollars. Corinthian Colleges and ITT Technical Institute were shut down in an effort to eliminate massive federal tax investment in shoddy programs.

The Washington Post‘s Danielle Douglas-Gabriel provides some of the tangled three year history of DeVos’s delay in processing loans: “The secretary’s appearance (before the House Education Committee last week) came days after the Education Department updated its formula for processing debt relief claims made under a statute known as borrower defense to repayment.  One major change involves using a sliding scale based on a borrower’s wages to determine loan forgiveness.  Higher education experts say that will result in substantially less loan cancellation than previously… A federal judge in 2018 blocked DeVos’s first attempt to cancel only a portion of the debt amassed by former Corinthian Colleges students, ruling the department violated privacy laws in its use of earnings data from the Social Security Administration. The case resulted in DeVos being held in contempt Oct. 24 for violating a court order to stop collecting loan payments from former students of the defunct for-profit chain. DeVos said the Corinthian case has prevented the department from issuing decisions on nearly 300,000 claims filed by borrowers—most of whom attended for-profit colleges.”

Douglas-Gabriel explains that the Department of Education’s inspector general and key staff in the Obama administration had recommended prompt and full cancellation of the loans of defrauded students when Corinthian Colleges and ITT Technical Institute shut down: “Obama…. department staff had recommended that former Corinthian and ITT Tech students receive full relief because the schools provided no value, according to memos reported by NPR this week.  DeVos said Thursday she was unaware of the memos and said, ‘There were many students who received valuable education from Corinthian… The previous administration weaponized the regulation against schools it simply didn’t like.'”

The AP‘s Colin Binkley quotes House Education Committee Chair, Rep. Robert (Bobby) Scott responding to DeVos at last week’s hearing: “Those defrauded borrowers have been left with mountains of debt, worthless degrees and none of the job opportunities they were promised… Defrauded borrowers have been cheated twice: First by their college, and then by a Department of Education that refuses to make them whole.”