In the 19 months since becoming the U.S. Secretary of Education, Betsy DeVos has issued a rush of announcements that remove or undermine previous rules designed to protect students from predatory corporate-run colleges and student debt-collection agencies—changes that are likely to impact low-income students disproportionately.
DeVos’s actions call to mind a dark moment in American history when the fox was guarding the henhouse: the Teapot Dome scandal, when Harding administration cabinet members lined their pockets with public money, leasing government property to private interests. The lesson from that era is surely that it is unwise to appoint corporate insiders to regulate their own industry.
In one of her most recent announcements, DeVos signed a deal worth hundreds of millions of dollars with Windham Professionals, Inc., a company with which she recently had financial ties. Windham is one of two firms selected by the Education Department to help the government collect overdue student loans.
Windham and Performant Financial Corp. won out over nearly 40 others for government debt-collection contracts worth up to $400 million. DeVos’s investments in Windham were sold a hair’s breadth before she became education secretary—divesting them along with 107 other business ventures that smacked of conflict of interest.
She has also led a campaign to keep the for-profit-friendly Accrediting Council for Independent Colleges and Schools (ACICS) alive. DeVos earlier this year reinstated it over findings by her own department that it failed to meet 57 of 93 criteria required under federal law. Just last month, she delayed for a second time a final decision on the future of the body. ACICS had approved the for-profit chains ITT Technical Institute and Corinthian Colleges, which faced a series of legal challenges over their practices and are now out of business.
In July, DeVos’s department issued new, narrowly restrictive guidelines that pull teeth out of Obama-era “borrowers defence to repayment” rules. The revised rules set the bar so high that it is altogether futile for students who are defrauded by for-profit education providers to get their loans forgiven. Poorly-served students will now be eligible for relief only if they can prove they were deliberately misled. Since 2015, the Education Department has received more than 100,000 fraud claims, with most still under review. The DeVos proposal also permits schools to force students to sign arbitration agreements, barring them from suing—a practice that favors for-profits. In the latest twist in borrower defense actions, this week, a federal judge ruled that DeVos’ delay in implementing the previous Education Department rules is illegal.
In perhaps her most troubling recent action, last month DeVos scrapped the so-called “gainful employment” rule, a regulation that would have required for-profit colleges to prove that enrolled students can earn a decent living after graduation. According to The New York Times, it was “the most drastic in a series of policy shifts that will free the scandal-scarred, for-profit sector from safeguards put in effect during the Obama era.” The rule would have cut off federal funds and access to financial aid for poorly performing schools.In another action—never announced officially by the Education Department—DeVos disbanded a team in May at the agency looking into widespread for-profit abuse. “The unwinding of the team has effectively killed investigations into possibly fraudulent activities at several large for-profit colleges where top hires of Betsy DeVos, the education secretary, had previously worked,” The Times concluded.
In an essay last summer, calling for closing-down the for-profit industry, I warned that for-profit universities go after the most vulnerable, often leaving hapless students with insupportable debt and few marketable skills. These schools often have higher tuition than at state schools, with high student-loan default rates and poor post-graduation employment.
DeVos’s moves become clearer when you look at who DeVos has brought into the department during her tenure:
Julian Schmoke Jr. leads the unit that polices fraud in higher education. Schmoke previously directed campus operations at the for-profit West Georgia Technical College and served as a dean at DeVry University. DeVry’s parent, now rebranded as Adtalem Global Education, last year paid the Federal Trade Commission $100 million in fines for misleading students about potential decent-paying jobs after graduation. Separately, the company settled with the Education Department over similar serious allegations. Schmoke is also responsible for processing student debt relief for defrauded students. In July, DeVry still had nearly 2,000 unprocessed claims.
A. Wayne Johnson is on his way to run Federal Student Aid (FSA), the government’s trillion-dollar student loan system. While the press release announcing his nomination cited his more than 30 years of experience in the financial-services industry and his Ph.D. in higher education leadership, his connection to Reunion Financial Services, as founder and CEO of a company that originates and refinances student loans, was suspiciously omitted. He is also founder of a payments technology company known as First Performance Corporation. DeVos announced that she is appointing Johnson to ensure Federal tax dollars are spent prudently. Good luck with that. (Because of Johnson’s obvious conflict of interest, his appointment is not entirely assured.)
Robert Eitel, a former vice president at two for-profit operators, Bridgepoint Education and Career Education Corp., played a decisive role in suspending the "borrower defense to repayment" rules. According to ABC News, Eitel circulated talking points opposing borrower defense to department staff, edited documents, and even signed off on a public delay notice. Last year, Bridgepoint reached a $23.5-million settlement with the Consumer Financial Protection Bureau to refund defrauded students and pay an $8 million civil penalty for deceiving them.
Two hundred years ago, Thomas Jefferson, perhaps the most reflective founder of our American democracy, writing to a close French friend, outlined essentials that must guide the ethical conduct of government: “But when we come to the moral principles on which the government is to be administered, we come to what is proper for all conditions of society… Liberty, truth, probity, honor, are declared to be the four cardinal principles of your society. I believe with you that morality, compassion, generosity, are innate elements of the human constitution…”
In running a kleptocracy out of the Department of Education, Betsy Devos has turned her back on Jefferson’s notion of responsible and dedicated government.
