Who knew an Education Secretary would garner so much press?
Normally a low-profile job, Betsy DeVos has elevated her position to unprecedentedly controversial levels.
Upon assuming her role as the nation’s education advocate, Education Secretary Betsy DeVos decided to rescind support requiring the U.S. Education Department to investigate loan servicing companies’ past conduct before the government awards lucrative contracts. Interestingly, these are the very companies in which DeVos and her family have vested business interests.
Then she reversed former President Barack Obama’s directive requiring schools to allow transgender students to use restrooms that conform to their gender identities.
She also scrapped Obama-era guidelines on investigating college and university campus sexual assault.
She also decided students’ civil rights are no longer a priority, and has rescinded methods the previous administration used to investigate violations.
Last week, Fortune reported DeVos intends to end a program that cancels students’ debt if for-profit, so-called “diploma-mill universities”–like Trump University”–defrauded them.
Well, guess what.
The Education Department’s Inspector General reports Secretary DeVos stopped processing fraud claims as soon as she assumed office.
The Trump administration has received 25,991 fraud claims since January 20.
It has processed none of them.
Contrast this with the Obama administration.
From July 1, 2016 up to Trump’s inauguration, the education department received 46,274 claims and approved 27,986.
This is a direct result of House of Representatives legislation HR 4508, a.k.a. the PROSPER Act, intended to “simplify” the existing student loan system.
The bill seeks to repeal and prevent the “Borrower Defense” program DeVos has already decided not to enforce.
About it, Alan Collinge of
“The student loan ‘swamp’ wrote HR 4508. Killing the Borrower Defense Rules was high on their wish list. This bill is their Christmas tree.”
On page 250, section 452 of the PROSPER Act, we find this:
“(C) In no event may the borrower recover amounts previously collected by the Secretary later than 3 years after the misconduct or breach of contract on behalf of the institution takes place that gives rise to the borrower to assert a defense to repayment of the loan.”
In other words, the student loan borrower has three years to seek compensation if he or she suspects the school engaged in “misconduct” promising future employment or trumped up job statistics–the very offenses Trump University committed for which the now President of the United States settled a lawsuit for $25 million last year.
Some may argue, “Three years? So what? That’s plenty of time to figure out someone is being taken advantage of.”
Except it takes many students two or more years in school before the raw deal they signed comes to fruition.
Another provision in the PROSPER Act is buried in section 422, under “LOAN REHABILITATION.”
That line states loans may now be rehabilitated “two times” instead of once.
Alan Collinge explains:
“[Rehabilitation] is where a defaulted loan is recycled into a new, much larger loan, and the agents making this happen get a whopping commission of up to 16 percent.”
This is usually the first step of borrowers descending into a cycle where they’re eventually paying only the loan interest, never the principal.
Raising borrowing caps is another problem.
Under the new plan, students dependent on their parents could increase their borrowing by $8,000. Students not dependent on their parents would be permitted to borrow an additional $3,000. Graduate and medical school students would be permitted between $10,000-$12,000 more.
Increased aid to students. What’s wrong with that?
The devil is in the details.
Rising available credit inflates tuition costs.
In the long run, students could ultimately owe more on a denied discharge than if they had not sought cancellation and continued making payments.
The inspector general’s report shows borrowers’ interest and fees accumulating, their credit damaged.
Some state attorneys general are pressuring the education department to cancel the loans, arguing students cannot afford to repay because the for-profit schools did not provide adequate training or a diploma.
The inspector general also found the department maintain a sufficient information system, subjecting it to manually retrieving claims data.
Sen. Patty Murray (D-Wash.), senior Democrat on the Education Committee, said:
“Hundreds of thousands of students were defrauded and cheated by predatory colleges that broke the law, but today’s report confirms Secretary DeVos tried to shirk her responsibility to these students and shut down the borrower-defense program, leaving them with nowhere to turn.”
A. Wayne Johnson, chief operating officer of the federal student aid program, said in a memo to the inspector general the department has “authorized an interest credit” for long-outstanding claims. It will resume reviewing select claims, and soon approve those for 11,000 Corinthian College students.
Image credit: cityandstateny.com