After a few months of relative quiet, U.S. Education Secretary Betsy DeVos finds herself once again in the headlines for her conflicts of interest with for-profit colleges.
The Obama Administration set in place policies requiring the U.S. Education Department to investigate loan servicing companies’ past conduct before the government awarded lucrative contracts. Those contracts were required to include certain consumer protections, such as prohibiting loan servicing companies from cheating federal student loan borrowers, and guiding borrowers through the repayment process.
A Total 180
In May, Betsy DeVos decided to no longer support these policies mostly due to 102 companies – the very ones from which Obama’s student lending policies were meant to protect – in which DeVos and her family have vested interests.
DeVos announced last month her education department was planning to revise the borrower defense rule and the Gainful Employment Rule, requiring schools to guarantee their career training programs prepare students for well-paying jobs that allow them to defray their student loans.
Now 18 states are suing DeVos’s education department over the recent suspension of the rules due to have taken effect July 1 that would have canceled student-loan debt from students Corinthian College, Trump University, and other for-profit schools defrauded.
Massachusetts, California, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maryland, Minnesota, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, and Washington, plus the District of Columbia, stated in a U.S. District Court filing that the education department violated federal law in announcing the delay with limited public notice and opportunity for input.
In a statement Thursday, Massachusetts Attorney General Maura Healey said:
“Since day one, Secretary DeVos has sided with for-profit school executives against students and families drowning in unaffordable student loans. Her decision to cancel vital protections for students and taxpayers is a betrayal of her office’s responsibility and a violation of federal law. We call on Secretary DeVos and the U.S. Department of Education to restore these rules immediately.”
Consumer groups Public Citizen and Project on Predatory Student Lending also signed onto the suit.
DeVos claimed she pressed pause on the debt cancellation process acceleration because:
“[It] puts taxpayers on the hook for significant costs.”
DeVos also stated a delay is necessary since litigation in California over the rules is currently making its way through the courts. Attorneys general for the plaintiffs argue the education department and DeVos were using this pending litigation as “a mere pretext” to repeal the rules and replace them with those that “will remove or dilute student rights and protections.”
After for-profit franchise Corinthian collapsed in 2015 amid federal and state investigations into its post-graduation employment rates, the Obama Administration initiated rules to assist students stuck with loans for Corinthian tuition. Obama wanted to prevent students from obtaining loans they could not repay after graduation, specifically those from for-profit, career colleges that charge high tuition and promise students they are guaranteed to find jobs after graduating.
Conflict Of Interest
DeVos’s personal financial stake in the for-profit education industry is no secret.
In an Office of Government Ethics report, DeVos agreed to divest from an extensive list of companies posing conflicts of interest. Among these companies is LMF WF Portfolio, a company which helped finance a $147 million loan to the debt collection agency Performant Financial, a firm that does business with the Department of Education.
According to Politico, DeVos listed an investment between $500,001 and $1 million in KinderCare Education, formerly Knowledge Universe Education, a day care and early childhood education programs provider. She agreed to divest from that company. She also agreed to divest from Varsity News Network, Inc., a software developer for school athletics; Flip Learning, which develops interactive digital college-level textbooks; N2Y, LLC, which learning services to cloud-based learning services for special education;” and Caldwell and Gregory, Inc., which supplies laundry equipment for colleges, universities, and apartments.
DeVos agreed to resign from her position in her family’s investment firms, RDV Corporation and the Windquest Group. She will, however, keep her financial interest in those companies.
Among hundreds of holdings, DeVos listed a stake in the blood-testing company Theranos, valued at more than $1 million, into which federal prosecutors launched a probe last year about allegations of misleading investors about its technology.
DeVos also lists a stake in OSI Group, LLC, valued at $250,000 to $500,000, which regulators in China fined $3.6 million last year for selling expired meat repackaged with newer expiration dates in 2014.
The $1.4 trillion student-loan industry sparked heated debate in last year’s presidential campaign. Hillary Clinton and the Democrats sought to uphold Obama’s reforms; Donald Trump and Republicans contend the government should “get out of the business” of lending.
Featured Image: Screenshot Via YouTube Video.
