Due to her vested interests in financial institutions profiting from student loan debt, Education Secretary Betsy DeVos may be complicit when the next financial meltdown occurs.
The Obama administration put in place policies requiring the US 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.
But Betsy DeVos has decided she will no longer support these policies.
There are several reasons for this.
An Office of Government Ethics ethics report released January 20th–inauguration day–delineates 102 companies that pose potential conflicts of interest for DeVos and exposes DeVos’s investments in the very companies from which Obama’s student lending policies were meant to protect.
DeVos has no education experience, unless by “experience” we mean pumping millions of dollars promoting a school privatization agenda that includes taxpayer vouchers. Her record shows she and her husband, Dick DeVos, billionaire heir to the Amway fortune, have used their wealth to lobby politicians willing to advance an anti-public school agenda.
During Betsy DeVos’s confirmation hearing, Massachusetts Senator Elizabeth Warren (D) said:
“The Department of Education is in charge of making sure that $150 billion we invest in students each year gets into the right hands and that students have the support they need to pay back their student loans. The Secretary of Education is essentially responsible for managing $1 trillion dollar student loan bank and distributing $30 billion in Pell grants to students each year. The financial futures of an entire generation of young people depend on your department getting that right.”
Sen. Warren asked DeVos if she had any experience running either a bank or overseeing a $1 trillion loan program. DeVos answered no to both.
Warren then asked if either DeVos or her children had ever applied for a student loan from the federal government. Again, DeVos said no.
DeVos refused to commit to enforcing federal rules meant to prevent waste, fraud, and abuse against predatory for-profit institutions, like ITT Technical Institutes which the Obama administration shut down, and Trump University, which settled a $25 million dollar fraud lawsuit shortly before Trump took office.
Interestingly, DeVos does appear to have some experience in the student loan industry–through investments in a debt collections agency.
In the 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.
Performant recently lost out on a U.S. Department of Education contract representing 24 percent of its business, according to the company’s SEC report. It racked up 346 Better Business Bureau complaints, is accused of applying wage garnishments for satisfied debts, and calling debtors and their family at work. One consumer complaint posted online states Performant repeatedly harassed a ninety-year-old World War II veteran for a nonexistent Wells Fargo student loan.
The Consumer Financial Protection Bureau (CFPB) has myriad complaints against the company registered in its public database as well, including Performant’s repeated attempts to collect debt already paid and representatives using “obscene/profane/abusive language.”
Secretary DeVos is now in a position to influence the awarding of contracts to companies like Performant, and has oversight responsibility for private debt collectors working for the government.
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 too. 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 “provides 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.
“It is already unquestionable that Betsy DeVos is the most unqualified Education Secretary nominee in our nation’s history…She will make the student debt crisis exponentially worse. Allowing borrowers to refinance their federal student loans, just like you can a mortgage, is something that would immediately allow 25 million borrowers get lower interest rates at no net cost to taxpayers. But if Betsy DeVos is personally profiting from the existing system, she will likely do nothing to help the hardworking student loan borrowers across Wisconsin and across the nation.”
Although she has agreed to divest from the companies in which she was involved, Betsy DeVos’ very involvement in them demonstrates her possible intent to monetize public education. It does not automatically mean she will, but her eschewing Obama-era policies designed to prevent these firms from preying on borrowers does not appear to indicate her willingness to challenge the status quo.