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.”