Secretary Cardona Begins to Correct DeVos’s College Loan Policies that Undermined Vulnerable College Students’ Access to Education

Education Secretary Miguel Cardona has begun repairing some of the injustice of Betsy DeVos’s policies in the federal college loan program administered by the U.S. Department of Education.

In an extremely significant first step, two weeks ago, Cardona replaced Mark A Brown, who had been appointed by Betsy DeVos in 2019 to oversee the Department’s enormous student loan program. Brown is known to have favored the interests of the for-profit colleges that depend for their existence on tuition derived from student loans. As Brown’s replacement, Cardona has appointed Richard Cordray, a dogged advocate for the students and military veterans who have been preyed upon by for-profit colleges.

The Washington Post‘s Danielle Douglas-Gabriel reports: “Education Secretary Miguel Carrdona… named Richard Cordray, the first director of the Consumer Financial Protection Bureau, to head the federal office that oversees the government’s $1.5 trillion student loan portfolio. Cordray led the bureau’s crackdown on consumer abuses in debt collection, student loan servicing, and for-profit colleges, garnering the respect of advocates and drawing the ire of those industries. His selection signals tougher oversight of the Education Department’s contractors and enforcement of the rules governing federal student aid… During his six-year tenure at the CFPB, which he joined in 2011, Cordray frequently clashed with the financial industry and conservatives over his aggressive regulation. His efforts to weed out poor servicing of student loans and predatory career training schools at times put him at odds with the Education Department… The CFPB under Cordray’s direction brought some of the most high-profile student lending cases in recent years. Among them: a lawsuit against the now-defunct for-profit giant Corinthian Colleges for steering students into private loans that had interest rates as high as 15 percent.”

In a piece for The American Prospect, Robert Kuttner summarizes some of the outrageous Trump-DeVos abuses Cordray will need to address in the Department’s college loan program: “For starters, there is the appalling story of management of cancellation of debt for people who do ten years of public service. This is authorized under the Public Service Loan Forgiveness program. But under Trump and his education secretary, Betsy DeVos, the Education Department did everything possible to deny this relief. To date, just 1.26 percent of applicants have received debt relief… More broadly, Cordray needs to reverse the Education Department’s Trump-era priority—from collecting as much money as possible to serving the needs of students and former students now in debt. One way to do that is to exercise much tougher oversight of the for-profit loan servicers on contract to the department, who often give bad advice to students in order to maximize their own profits.”

In March, Cardona granted debt relief to approximately 72,000 college students whose claims that their mostly for-profit colleges had defrauded them had already been adjudicated by Betsy DeVos’s staff. And at the end of March, Cardona also extended a freeze on loan payments and interest to borrowers who have defaulted during the pandemic and set the interest rate at zero.  POLITICO’s Michael Stratford reported: “The Education Department said that it will immediately suspend the collection of 1.14 million federally backed student loans that are in default. The relief will apply retroactively… and the agency will refund the tax returns and wages that it seized from borrowers who have defaulted since March 13, 2020, when President Donald Trump declared a national emergency because of COVID-19.”

However, many defrauded borrowers agree with Kuttner that despite some progress in Biden’s first few months in office, there is an urgent need to speed up relief after years of delay under Betsy DeVos.  On Friday, Danielle Douglas-Gabriel reported: “(W)hen it comes to cases involving federal student aid, consumer attorneys say the Biden administration is moving at a glacial pace. ‘I’m shocked that more than 100 days in we’re still in an active appeal on something that is so opposed to what the Biden administration claims it’s about.’  said Toby Merrill, director of the Project on Predatory Student Lending, a group representing borrowers in multiple Trump-Era cases….  Education Department spokeswoman Kelly Leon said the agency’s ‘new leadership is working actively to address concerns relating to the student financial aid policies of the prior administration.'”

Correcting DeVos era injustices for college students involves needed action in more than the loan program itself. Cardona has taken several steps to undo Trump-DeVos era policies that excluded vulnerable college students from pandemic relief assistance.

Politico’s Michael Stratford reports that beginning with the CARES Act in March 2020 and in all of the subsequent COVID-19 relief bills, “colleges must pass along roughly half of their COVID relief dollars directly to students in the form of emergency financial aid cash grants.”  However, in the Trump-DeVos years undocumented students, including DREAMERS who have lived in the United States since they were young children, and international students were shut out of this assistance: “The Biden administration is reversing a Trump-era policy that barred undocumented college students and others from receiving federal relief grants meant to help pay for expenses like food, housing, and child care during the coronavirus pandemic. Education Secretary Cardona on Tuesday (May 11, 2021) finalized a new regulation that allows colleges to distribute tens of billions (of dollars) in federal pandemic relief grants to all students, regardless of their immigration status or whether they qualify for federal student aid.”

The Washington Post‘s Danielle Douglas-Gabriel further explains DeVos’s rationale for excluding undocumented and international students from relief all last year: “After confusing and conflicting guidance, DeVos issued a rule in June asserting that only those who can participate in federal student aid programs can receive (pandemic relief) money.  It shut out undocumented and international students…. The Trump administration said a 1996 welfare reform law bars those groups from receiving public aid.”  Now, under Cardona’s leadership, “The Education Department said the final rule better reflects the intent of Congress and makes clear that emergency aid can support all students who are or were enrolled in college during the pandemic.”  The rule had been challenged by hundreds of colleges: “Many colleges and universities have been using their own institutional funds to lend a hand to undocumented and international students… Hundreds of schools urged the department to reverse course in public comments on the DeVos rule…. ‘Denying emergency grants to DACA and undocumented students wasn’t just legally questionable, it was a moral failing, and I’m relieved to see this finally corrected,’ said Justin Draeger, president of the National Association of Student Financial Aid Administrators.”

As we watch Secretary Cardona begin to address the injustices in education department programs intended to support vulnerable students secure a higher education, we more fully grasp the scope of the damage imposed under Betsy DeVos’s leadership.

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.”