Education Opportunity Network

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Betsy DeVos Fills The Swamp For For-Profit Colleges

The Democratic party has vowed to brand Republicans as the party of corruption in political campaigns for the upcoming midterm elections in November. Given the slew of scandal-ridden people that surround President Trump and the alleged crimes committed by Congressional Republicans who support the President, Democratic candidates have lots of fodder to stoke their messaging campaigns.

Numerous current and former officials in Trump’s Cabinet have also been dogged by corruption accusations that have forced some to resign under a “cloud of ethics scandals.” But perhaps one of the most corrupt cabinet officials still in office is Secretary of Education Betsy DeVos, and there are ample reasons Democrats should highlight her in their messaging campaign.

The education secretary is often the most overlooked cabinet officer, but DeVos is the most unpopular official in the Trump team, and Democrats who plumb the depths of her shady actions will be rewarded with a trove of dark anecdotes.

DeVos ascended to her office with a deep resume of corrupt influence in her home state of Michigan, where she used her family’s considerable wealth to elect candidates and lobby for legislation that erected a billion-dollar charter school industry largely operated by for-profit management companies. As secretary, DeVos is now rewarding charter schools with huge grants courtesy of the US taxpayer.

But in her secretarial duties, DeVos’s greatest contribution to corruption has been in the higher education sector. During her nomination hearing, she was questioned about her family’s investments in LMF WF Portfolio, a company that helped finance a $147 million loan to Performant Financial Co., a college loan servicing and debt collection firm.

DeVos was required to divest from Performant, but her favors to the firm have continued.

Shortly after taking office, DeVos appointed James Manning to be Acting Under Secretary, the number three official in the Department, with responsibility for higher education, and also later put him in charge of the Department’s Office of Federal Student Aid (FSA), which oversees compliance by colleges with department rules regarding taxpayer-funded grants and loans. A letter of concern sent by Democratic senators notes Manning has deep ties to companies involved in the college student loan servicing industry, including a client and business associate who sits on the board of directors of Performant.

Another bone DeVos threw to the college Performant and other student loan firms was her department’s reversal of policies from the Obama administration that had disqualified loan servicers, like Performant, that had records of charging high fees and abusing debt holders. Then, when her department had to decide which company to award a new contract for student loan services, lo-and-behold, Performant got the contract.

A court battle eventually pressured the department to rescind the Performant contract, but the clear conflict of interest evident in DeVos’s department of education would emerge again in other decisions.

Indeed, DeVos’s cronyism with the student loan servicing industry is far exceeded by her efforts to promote the for-profit college industry.

The Obama administration chose to crackdown on for-profit colleges due to concerns that these schools pushed desperate students into useless degree programs that led to massive debts and few prospects for jobs –all at taxpayer expense.

But DeVos filled regulatory positions for for-profit colleges with former employees and advocates for these schools.

Two DeVos hires – senior advisor Robert Eitel and attorney Linda Rawles – worked at Bridgepoint Education, which has run into trouble for deceiving students into taking out loans that cost more than advertised, collecting federal loan money even though the vast majority of students drop out, and rewarding corporate executives and shareholders with huge profits reaped from public funds.

Other DeVos hires – senior adviser Diane Auer Jones and general counsel Carlos G. Muñiz – have previous connections to Career Education Corporation, a for-profit operator that made a $10.25 million settlement with New York over charges it had inflated graduates’ job placement rates.

Another DeVos hire, Julian Schmoke, is former dean of a for-profit college DeVry University (now called Adtalem Global Education), which paid $100 million to settle a lawsuit over misleading marketing tactics. Schmoke new job? To lead the unit that investigates claims of large-scale fraud involving student loans.

Unsurprisingly, after Schmoke was hired, the Education Department downsized the unit into a three-person operation, scaled back activities or redirected resources, and cancelled investigations into Bridgepoint Education and Career Education Corporation.

After stocking her staff with cronies of the for-profit college industry, DeVos gave strong signs her department would ease the regulatory environment for the taxpayer-financed career education sector, which for-profit colleges dominate.

She and her appointees dismantled key federal student loan servicing reforms that protected student loan borrowers and made it easier for college students to have loans discharged when they’ve been defrauded by schools.

Then her deparment delayed implementation of the gainful employment rule, an Obama reform that penalizes career-oriented for-profit programs from letting students run up huge debts while they pursue careers that are low paying or have few job prospects. The delay eventually became a reversal, as DeVos recently proposed new rules that let for-profit colleges evade the consequences of scamming students who’ve used federal loans to attend these schools.

Safeguards imposed by the Obama administration addressed widespread fraud committed by for-profit colleges by giving students a path toward relief from loan debt and reimbursement when they’ve been wronged. But new rules proposed by DeVos would make it extremely difficult for students to prevail should they fall victim to fraud.

For instance, standards for what defines false statements made by a school would be narrowed, and schools will no longer be liable for breaches of contract or violations of state law. Students must prove the school intended to commit fraud, and fewer indebted students woiuld be eligible to obtain loan relief.

Tellingly, days after DeVos announced her new rules, Bridgepoint Education’s stock made a huge gain on Wall Street.

While making it easier for for-profit colleges to rip off students, DeVos is also allowing many of these institutions to convert to “nonprofits to free these institutions from remaining federal regulations and help them burnish their tarnished brands.

DeVos’s action have come just as yet more for-profit colleges are closing campuses under suspicion of defrauding students. Branches of the Illinois Art Institute, Argosy University, and South University that operate in Illinois, North Carolina, Pennsylvania, and elsewhere have been accused of misleading students about the accreditation status of its campuses and converting to low-quality online-only instruction.

The need to rein in for-profit colleges and rescue their students remains acute. In 2015-16, federal government reports show 3.9 million undergraduates with federal student loan debt dropped out of college. More than 900,000 of these students left for-profit universities, making up 23 percent of all indebted dropouts, although only 10 percent of all undergraduates attend for-profits. In a ranking of colleges by their numbers of indebted dropouts, for-profits comprise the top five.

Addressing the college student loan servicing industry and the corrupt for-profit college industry and their roles in expanding the student debt crisis are not only moral imperatives; they’re also a winning issue for Democrats.

A strong majority of likely voters view student debt as a “crisis,” according to a recent poll, with more than 70 percent of Democrats, 67 percent of independents, and 57 percent of Republicans agreeing the $1.5 trillion in student debt amassed by millions of Americans is now an alarming issue in need of being addressed by congressional and presidential action.

Sensing the need to act, state attorneys general in 18 states and the District of Columbia have filed a lawsuit to prevent DeVos from reversing the Obama administration’s rules for protecting students who borrowed money to attend colleges that have closed or defrauded them. DeVos has called their lawsuit “ideologically driven,” using the near exact language the leader of the for-profit college lobbying arm uses to criticize the Obama-era rules.

Democrats should make clear that given the choice of “ideology” over blatant corruption, they’ll chose ideology every time.

(Photo credit: Rick Schindler, Flickr Creative Commons)

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