Income-Based Repayment Plans for Student Debtors: Is Betsy DeVos a Slave Trafficker?

To my astonishment, Betsy DeVos, President Trump's Secretary of Education, publicly admitted that the federal student-loan program is a disaster. In a speech she gave last November, DeVos acknowledged that only 1 out of 4 student debtors (24 percent) is making loan payments that cover both principal and interest and that 43 percent of all student loans are in "distress."

Unfortunately, DeVos's Department of Education and its contracted debt collectors are making this crisis worse.  Probably 20 million Americans would be eligible to discharge their student loans in bankruptcy if these loans were treated like any other consumer debt (credit cards, auto loans, etc.) But the Bankruptcy Code's "undue hardship" rule, interpreted harshly by many bankruptcy judges, has pushed millions of distressed student-loan debtors into lifetimes of servitude.

Every few months, however, a bankruptcy judge rules compassionately and sensibly and discharges some student loan debt. There is now a good-sized body of cases that have ruled in student debtors' favor.

You would think the Department of Education would encourage this trend, which would hasten relief to millions of destitute student borrowers. If DOE would endorse the Seventh Circuit's ruling in Krieger, the Eighth Circuit Bankruptcy Appellate Panel's decision in Fern, the Sixth Circuit's ruling in Barrett, the Tenth Circuit's ruling in Polleys, and the Ninth Circuit Bankruptcy Appellate Court's ruling in Roth, we would be moving a big step forward toward granting debt relief to millions of honest but unfortunate student borrowers.

But that has not been what Betsy's DOE has done. DOE and its student-loan servicing companies (primarily Educational Credit Management Corporation) have fought bankruptcy relief in bankruptcy courts all over the United States.(The Roth, Myhre and Abney cases are particularly shocking).

And here's one current example. Vicky Jo Metz, a 59-year old woman, attempted to discharge her student loans in bankruptcy, and a sympathetic Kansas bankruptcy judge granted her a partial discharge. Metz had borrowed  $16,663  back in the early 1990s to attend community college but she was never able to pay off her student loans. In fact, she filed for bankruptcy relief more than once.

By the time she was in her late 50s, Metz's student -loan debt had grown to $67,000, because her loan balance continued to grow due to negative amortization.  Judge Robert Nugent concluded Metz could never pay back what she borrowed plus the accumulated interest, and he crafted a sensible and compassionate ruling. Judge Nugent forgave the accumulated interest on Metz's debt and ordered her to pay back the principal--$16,663.

That's a fair solution, and in my opinion, Judge Nugent's ruling was consistent with guidance from the Tenth Circuit Court of Appeals in the Polleys decision. (Metz's Kansas bankruptcy court is in the Tenth Circuit.) The Polleys ruling had instructed lower courts not to interpret the Bankruptcy Code's "undue hardship" provision in a way that would nullify the central purpose of bankruptcy, which is to give an honest debtor a "fresh start."

ECMC, DOE's chief pugilist in the bankruptcy courts, appealed Judge Nugent's decision. Metz should be placed in a long-term income-based repayment plan, ECMC argued, a plan that would require Metz to make monthly payments on her debt for as long as 25 years.

Judge Nugent had rejected ECMC's arguments in his court, pointing out that Metz would be 84 years old when her payment obligations ended. Moreover, Judge Nugent noted, Metz's debt would continue to grow because Metz's payments would not be large enough to cover accumulating interest. Judge Nugent calculated that Metz would owe $157,000 when her payment obligations ended--9 times what she borrowed back in the 1990s!

ECMC's arguments in Vicky Jo Metz's case are either deeply cynical or insane. Basically, ECMC, DOE's hired gun in this dispute, is asking a federal court to sentence Vicky Jo Metz to a lifetime of servitude--paying on a student-loan debt, which will grow bigger with each passing month.

In effect then, the Department of Education and ECMC are slave traffickers, condemning millions of Americans to repayment programs which can stretch over their entire lives.

In my view, the federal courts are poised to craft more compassionate standards for discharging student loans in bankruptcy, which would allow decent people like Ms. Metz to clear away debt they will never repay.  Unfortunately Betsy DeVos's Department of Education and ECMC are doing every thing they can to persuade the federal judiciary not to rule compassionately.

After all, there's a lot of money in the slave trade.

Cases

Abney v. U.S. Dept. of Educ. Corp.  (In re Abney), 540 B.R. 681 (Bankr. W.D. Mo. 2015).

Barrett v. Educ. Credit Mgmt. Corp., (In re Barrett), 487 F.3d 353 (6th Cir. 2007).

Educ. Credit Mgmt. Corp. v. Polleys (In re Polleys), 356 F.3d 1302 (10th Cir. 2004).

Fern v. FedLoan Servicing (In re Fern), 553 B.R. 362 (Bankr. N.D. Iowa 2016), aff’d, 563 B.R. 1 (B.A.P. 8th Cir. 2017).

 Krieger v. Educ. Credit Mgmt. Corp., 713 F.3d 882 (6th Cir. 2013).

Metz v. Educ. Credit Mgmt. Corp., 589 B.R. 750 (Bankr. D. Kan. 2018), on appeal. 

Murray v. Educ. Credit Mgmt. Corp. (In re Murray), 563 B.R. 52 (Bankr. Kan. 2016), aff’d, No. 16-2838, 2017 WL 4222980 (D. Kan. Sept. 9, 2017).

Myhre v. U.S. Dep’t of Educ. (In re Myhre), 503 B.R. 698; 2013 (Bankr. W.D. Wis. 2013).

Roth v. Educ. Educ. Mgmt. Corp. (In re Roth), 490 B.R. 908 (B.A.P. 9th Cir. 2013).

References

DeVos, Betsy, Secretary of Educ., Prepared Remarks by U.S. Secretary of Education Betsy DeVos to Federal Student Aid’s Training Conferences (Nov. 27, 2018). Available at https://www.ed.gov/news/speeches/prepared-remarks-us-secretary-education-betsy-devos-federal-student-aids-training-conferencet.

Department of Education's Heightened Cash Monitoring List: Students should check to see if their college is in financial trouble

Steve Rhode performed a valuable public service last month when he published the U.S. Department of Education's most recent Heightened Cash Monitoring List.  This is DOE's list of schools that have various financial concerns, including accreditation problems or missing audits, as well as schools that are on financially shaky ground.

DOE does not make the list easy to review. I could discern no organizational pattern. Public schools, private nonprofits, proprietary schools, and foreign schools are all listed together. In total, there are more than 500 schools on the list.

Not surprisingly, more than half the schools with financial concerns are proprietary schools--a total of 275 for-profit institutions.  A good share of these schools are devoted to hairstyling or beauty. Forty-six schools on DOE's HCM list have the word Beauty or Cosmetology in their names; and there are three massage schools on the list.

The list also includes a large number of private, nonprofit colleges or universities: 128 schools in all. A fair number have religious affiliations. Seven schools on the list have the word Baptist in their name, and three school names include the word Wesleyan, indicating a Methodist affiliation.  Twelve colleges have the word Christian in their titles, and there were several other schools with names suggesting a religious connection: Bethel, Bethany, Bible, Seminary, etc.

DOE listed 35 foreign colleges and universities on its Heightened Cash Monitoring List. You might find it surprising that the federal government is funding foreign study at the same time the national parks are closed, but it does. Among the 35 foreign schools with various financial concerns are Hebrew University of Jerusalem, Universiteit Van Amsterdam in the Netherlands, University of Aukland in New Zealand, Centro De Estudios Universitarios Xochicalco in Mexico; and Poznan University of Medical Sciences in Poland.

DOE's list includes a category of schools with high student-loan default rates. Schools with a three-year default rate of 40 percent and schools that have a three-year default rate of at least 30 percent for three years are ineligible for federal student-aid money. 

Remarkably, none of the 500 plus schools on DOE's HCM list were flagged for having a high student-loan default rate. How could that be when Secretary of Education Betsy DeVos herself said that only 24 percent of student borrowers were paying down the principal and interest on their loans?

In my view, DOE's HCM list under reports the number of American colleges and schools that are in financial trouble. Nevertheless, the list is useful. 

First, the list confirms that a large number of small, private nonprofit colleges are in trouble, including many with religious ties. 

Second, we can see from the list that the largest share of financially troubled schools are for-profit institutions.

Finally, the list is a reminder that the U.S. Department of Education is loaning money for Americans to go to school overseas, which seems insane given the excess capacity in American higher education.

Of course not all schools on DOE's HCM list are experiencing serious financial problems. Some are on the list due to accrediting issues, inadequate administrative support, or audit irregularities. Nevertheless, all  postsecondary students should check the list to see if their school is on it. And parents who are helping their children decide where to go to college should also check the list. No one wants to enroll in a college that may close before the student graduates.

References

Rhode, Steve. Schools on the Warning List by the Department of Education--December 2018. Get Out of Debt Guy (blog), December 26, 2018.

Public Service Loan Forgiveness Program is a "disaster" according to DOE official: A hurricane is coming to PSLF

In a recent speech, Secretary of Education Betsy DeVos called the federal student loan program "a thunderstorm loom[ing] on the horizon." Only 20 percent of borrowers are paying down the principal and interest on their loans, DeVos said, even as students borrow more and more money to finance their higher education.

Comparing the student loan program to a thunderstorm may be an understatement. It might be more accurate to compare the program to a hurricane bearing down on the Gulf Coast at 150 miles an hour. And--extending my hurricane analogy a bit further, we might say the Public Service Loan Forgiveness Program (PSLF) is the "dirty side of the storm."  In fact, Diane Jones, a senior DOE official, called PSLF a "disaster" earlier this week. Jones said the Department of Education does not support PSLF, although it will meet its legal obligations to administer the program.

But DOE is not administering the PSLF program, or--to be more accurate--DOE is not administering the program competently.  As has been widely reported, DOE had processed 28,000 PSLF loan forgiveness applications by late September and only approved 96! What's going on?

Personally, I think DOE number crunchers looked at PSLF and realized that the program will be extremely expensive if it is administered correctly--shockingly expensive. DeVos and her senior minions know the program will cost taxpayers billions of dollars if DOE processes loan-forgiveness applications in accordance with PSLF participants' reasonable expectations.

As Jason Delisle said in a 2016 paper for the Brookings Institute, by at least one interpretation, PSLF's definition of eligible participants is quite broad. Delisle estimates that one quarter of the entire American workplace is a public service worker and all these people are eligble to participate in PSLF if they have student loans.

Delisle cited a 2015 General Accountability Office report in support of  his conclusion. On page 10, footnote 19, GAO said borrowers are eligible for loan forgiveness under PSLF if they are "employed full time by a public service organization or serving in a full-time Americorps or Peace Corps position."

What is a "public service organization? This is what GAO said:

Qualified public service organizations include those in federal, state, local government; 501(C) nonprofits; and other nonprofit organizations providing a variety of public services. 

That definition is a lot broader than the common perception that PSLF is open primarily to nurses, police officers, and first responders. I know for a fact that many student borrowers who work at public universities and community colleges believe they are eligible for loan forgiveness through PSLF.

We will get some guidance about who is eligible for PSLF when the American Bar Association's lawsuit against DOE is decided. ABA sued DOE in 2016 when it denied PSLF eligibility to public-service lawyers working under ABA's auspices. ABA wants a federal court to rule that its employees are eligible for PSLF; and ABA and DOE have both filed motions for summary judgment.

If a federal court declares ABA to be a public service organization whose employees are eligible for PSLF student-loan forgiveness that will be an indication that DOE's narrow interpretation of a public service organization is far too narrow and legally incorrect.

In the meantime, almost a million people have applied to have their student loans certified as eligible for PSLF.  Of the 28,000 people who filed for loan forgiveness since last September, DOE granted forgiveness to less than 1 percent. DOE declared that seventy percent of the applicants were ineligible.

Millions of people working in the public sector took out student loans in the reasonable belief they are eligible for loan forgiveness after ten years of public service.

DOE has taken the position that most of these student-loan borrowers are wrong. No wonder DOE Undersecretary Diane Jones calls PSLF a "disaster."

PSLF is a "disaster" according to DOE official

References

American Bar Association v. U.S. Department of Education, Complaint for Declaratory and Injunctive Relief, Case No. 1:16-cv-02476-RDM (D.D.C. Dec. 20, 2016).

Stacy Cowley. 28,000 Public Servants Sought Student Loan Forgiveness. 96 Got It. New York Times, September 27, 2018.

Stacy Cowley. Student Loan Forgiveness Program Approval Letters May Be Invalid. New York Times, March 30, 2017. 

 Jason Delisle. The coming Public Service Loan Forgiveness bonanza. Brookings Institution Report, Vol 2(2), September 22, 2016.

Betsy DeVos. Prepared Remarks by U.S. Secretary of Education Betsy DeVos to Federal Student Aid's Training Conference. November 27, 2018.

Casey Quinlan. Education Department official slams Public Service Loan Forgiveness program as 'disaster.' thinkprogress.org, December 4, 2018.

Jordan Weissmann. Betsy DeVos Wants to Kill a Major Student Loan Forgiveness Program, Slate, May 17, 2017.

U.S. Government Accountability Office. Federal Student Loans: Education Could Do More to Help Ensure Borrowers are Aware of Repayment and Forgiveness Options. GAO-15-663 (August 2016). 

Betsy DeVos compares the student-loan program to a thunderstorm looming on the horizon

Betsy DeVos, President Trump's Secretary of Education, gave a speech a few days ago in which she candidly acknowledged that the federal student-loan program is in crisis. In fact, she compared the student loan program to a "thunderstorm loom[ing] on the horizon."

Here is what Secretary DeVos said in her speech:

• The federal government holds $1.5 trillion in outstanding student loans, one-third of all federal assets.

• Only one in four federal student-loan borrowers are paying down the principal and interest on their debt.

• Twenty percent of all federal student loans are delinquent or in default. That's seven times the delinquency rate on credit card debt.

• The debt level of individual borrowers has ballooned since 2010. Most of this growth is due to the fact that postsecondary students are borrowing substantially more money than they did just eight years ago.

• The federal government's portfolio of outstanding student loans now constitutes 10 percent of our nation's total national debt.

DeVos basically admitted that a lot of federal student loans will never be paid back. In the commercial world, she said, no bank regulator would value the government's massive portfolio of student loans at full value. And she also admitted that the Department of Education, by itself, could only make "a few, small tactical measures" to address this enormous problem.

 In my view, DeVos's speech is the most useful statement about the student-loan program coming from a federal official since the publication of A Closer Look at the Trillion, released more than five years ago by the Consumer Financial Protection Bureau's Student Loan Ombudsman, Rohit Chopra.

As I have said repeatedly, the student-loan crisis will not be resolved until the for-profit college industry is shut down and struggling debtors have access to the bankruptcy courts to discharge their student loans.

But those reforms are not politically possible right now. In the meantime, Congress should join DeVos in adopting some "small tactical measures" to ease massive suffering. Here are some suggestions:

• Congress should adopt legislation banning the federal government from garnishing the Social Security checks of elderly student-loan defaulters. As the Government Accountability Office pointed out two years ago, most of the money collected from garnishing Social Security checks goes to paying off interest and penalties and not paying down the principal on the debt.

• Disabled veterans should have their student loans forgiven automatically by the government without the necessity of making a formal application.

• The Department of Education should streamline the loan-forgiveness process for borrowers who signed up for the Public Service Loan Forgiveness Program (PSLF).  As of a few months ago, DOE had approved less than 100 of 28,000 PSLF applicants.

• Insolvent students who took out private student loans and financially distressed parents who co-signed student loans for their children or who took out  Parent PLUS loans should have free access to the bankruptcy courts.

These measures, if adopted, would do little to relieve the massive suffering caused by mountains of student loan debt. But they would be a token of good faith by our government and a sign that our political leaders finally understand that the federal student loan program is out of control and has ruined the lives of millions of Americans who took out student loans in the naive hope that a college education would lead to a better life.

References

Rohit Chopra. A closer look at the trillion. Consumer Financial Protection Bureau, August 5, 2013.  Accessible at: http://www.consumerfinance.gov/blog/a-closer-look-at-the-trillion/.

Betsy DeVos. Prepared Remarks by U.S. Secretary of Education Betsy DeVos to Federal Student Aid's Training Conference. November 27, 2018.

United States Government Accountability Office. Social Security Offsets: Improvement to Program Design Could Better Assist Older Student Borrowers with Obtaining Permitted Relief. Washington DC: Author, December 2016).

Education Corporation of America brazenly uses an Alabama court to delay lawsuits against it. Is this a great country or what?

Education Corporation of America (ECA), a for-profit college chain, brazenly filed a federal lawsuit in Alabama last month, asking Judge Abdul Kallon to put it into receivership and enjoin all litigation against it. ECA hopes to delay its creditors and other litigants while continuing to receive federal student-loan money.

What a cocky, shameless and impudent strategy!

Judge Kallon initially obliged ECA, ordering a halt to all litigation against ECA until October 29. Then, on October 29, the judge  extended the injunction until November 5. Parties opposing ECA's Alabama litigation must find lawyers to represent them in Alabama, which will be costly.

For example, Gleneagles Office, LLC, a Maryland corporation, filed a lawsuit in Maryland last month, seeking to collect almost $100,000 in back rent and late fees from Virginia College, which ECA owns. Judge Kallon's injunction, issued seven days after Gleneagles filed its lawsuit for back rent, halted that litigation.

Gleneagles hired an Alabama law firm to oppose ECA's attempt to enjoin lawsuits against it. Gleneagles pointed out that ECA guaranteed the Virginia College lease and agreed that any dispute about the lease would be litigated in Maryland. Gleneagles also argued that Judge Kallon does not have jurisdiction over it.

A Texas company also joined the Alabama lawsuit to oppose ECA's request for an injunction. The Texas company is landlord to a Brightwood College campus in Arlington, Texas. Brightwood is another college owned by ECA.

Perhaps ECA's various landlords and creditors have the financial resources to fight ECA in Alabama, but ECA's former students do not. ECA's list of litigation against it (or its subsidiary affiliates) include several suits by former students. ECA managed to force many of these suits into arbitration, probably because ECA required students to sign arbitration agreements as a condition of enrollment.

So what's going on?

ECA is in financial trouble. Enrollments have dropped, and it is in danger of losing its accreditation. Meanwhile it has been sued by landlords, former students, and former employees on a variety of grounds.  ECA managed--temporarily at least--to halt all the litigation against it based on the signature of one Alabama federal judge, who may not have jurisdiction over any of this litigation. Some creditors have joined the Alabama lawsuit to stop this charade, but most of ECA's former students and employees don't have the financial wherewithal to do that.

Essentially, ECA's Alabama lawsuit has given ECA  all the benefits of bankruptcy without the downside of losing federal student loan money.  And when it becomes advantageous to do so, ECA can stroll into bankruptcy court any time it likes.

Isn't it ironic that ECA can use the courts to its advantage while its students are barred from suing it based on arbitration agreements ECA or its subsidiaries required them to sign as a condition of enrollment?

And isn't ironic that ECA can file for bankruptcy whenever it chooses (which it will probably do eventually), while ECA's students face enormous obstacles to discharging their student loans in bankruptcy?

Is this a great country or what?

References

Joinder of  Pioneer Industrial LLC and Pioneer Parking Lot, LLC to National Retail Properties LP's Memorandum in Opposition to Emergency Motion for The Appointment of a Receiver and Entry of a Temporary Restraining Order and Injunctive Relief, filed October 29 2018 in Education Corporation of America v. U.S. Department of Education, Case No. 2:18-CV-01698-AKK.

Non-party Gleneagles Office, LCC's Opposition to Plaintiff's Motion for Preliminary Injunction, filed October 29, 2018 in Education Corporation of America v. U.S. Department of Education, Case No. 2:18-CV-01698-AKK.

Order Extending Temporary Injunctive Relief, signed on Octobe 29, 2018 in Education Corporation of America, et al. v. United States Department of Education, 2:18-CV-01698-AKK.

Department of Education slow rolls the Public Service Loan Forgiveness Program: Like a drunk weaving through traffic

For many years, the Department of Education has managed the federal student-loan program like a drunk creeping through heavy traffic. It has stumbled, reeled, dissembled, weaved and bobbed, but always avoided a head-on collision with reality.

But that time is over. Under Betsy DeVos's colossal mismanagement (and her predecessors), DOE has messed up the Public Service Loan Forgiveness Program (PSLF), thereby telegraphing to 44 million student-loan borrowers that Betsy Devos is either fiendishly devious or spectacularly incompetent.

The PSLF program is not complicated.  Under federal law, student-loan borrowers who work for a qualified employer (governmental agency or non-profit) and make 120 student-loan payments under an approved repayment plan are eligible to have remaining student-loan debt cancelled. (It's a little more complicated than that, but not much.)

Almost 1.2 million borrowers have applied to have their employment certified for PSLF eligibility. More than a quarter million applications were denied. That alone is a startling fact.

But it gets worse. About 28,000 people who are in the PSLF program (or at least believe they are in it) applied to have their student loans forgiven based on their representation that they had made the 120 required student-loan payments. How many people have obtained debt relief so far? Less than 100!

What are we to make of this gigantic snarl?

First, DOE has made the PSLF program needlessly complicated. After all, the government only needs to answer two questions to determine who is eligible for debt relief. Did the applicant work for an approved employer for 10 years? Did the applicant make 120 one-time payments on his or her student loans?

Second, the PSLF program was poorly designed, and DeVos's DOE has reached the startling realization that the program is astonishingly expensive.  In my opinion, DOE is dragging its feet about processing PSLF claims to postpone the reckoning day, when it will have to publicly admit that PSLF is going to cost taxpayers billions of dollars.

The Government Accountability Office (GAO) released a report almost two years ago that concluded DOE had underestimated the cost of various student-loan repayment options. I'm guessing DOE did not figure on the huge debt loads some PSLF applicants were accumulating from going to graduate school: MBA degrees, medical degrees, law degrees, etc.

According to GAO, the average amount of forgiven debt for the first 55 people who received student-loan forgiveness is almost $58,000. If  this average continues to hold, and all 890,000 people whose loans and employment were certified eventually get debt relief, the cost will be $50 billion! Meanwhile, DOE can expect PSLF requests for certification and debt relief to continue being filed into the indefinite future.

No wonder DOE is slow rolling the PSLF loan-forgiveness process.

 References

Stacy Cowley. 28,000 Public Servants Sought Student Loan Forgiveness. 96 Got It. New York Times, September 27, 2018.

Department of Education's New Report on Student-Loan Casualties: A Dr. Strangelove Moment

You remember that great scene from the movie Dr. Strangelove.  U.S. President Muffley (played by Peter Sellers) worries about the consequences of nuclear war with Russia. "You're talking about mass murder," President Muffley muses.

But General Turgidson (played by George C. Scott) is not concerned. "I'm not saying we wouldn't get our hair mussed. But I do say no more than ten to twenty million killed, tops."

Betsy DeVos is our modern day General Turgidson. The student loan program is shattering the lives of about 20 million Americans.  But in DeVos' mind, that's a small price to pay for a program that enriches her buddies in the for-profit college industry.

And so without further ado, I will summarize the Department of Education's most recent report on the student-loan debacle.

Income-Driven Repayment Plans. As DOE reports, more and more distressed student borrowers are being herded into income-driven repayment plans (IDRPs). As of June, 7.1 million people are enrolled in IDRPs, a 20 percent increase from just a year ago.

Student borrowers in IDRPs are America's new serfs. They pay a percentage of their income for 20 or 25 years to repay the student loans they took on to attend some raggedy-ass college that didn't prepare them for a job.

Of course, IDRP monthly payments are generally low. In fact, IDRP participants who live below the poverty line make monthly payments of zero. But virtually everyone in these plans--7.1 million suckers--will die without ever paying back their loans. In fact, for most of them, their loan balances are going up with each passing month due to unpaid accruing interest.

Borrower Defense to Repayment. According to DOE, 166,000 student borrowers filed so-called "borrower defense" claims. These claimants are seeking loan forgiveness on the grounds they were defrauded by the colleges they attended. Thousands of these claims were filed by people who attended just two for-profit institutions that went bankrupt: Corinthian Colleges and ITT Tech.

As of June 30, two thirds of these claims are still pending, and only 80 percent of the processed claims were approved.  Meanwhile, borrowers who have pending claims are still obligated to make their monthly loan payments.

Delinquency Rates. Delinquency rates are down slightly, DOE assures us, but almost a quarter million borrowers defaulted on their student loans during the third quarter of this year.  That's 2755 people going into default every day.  A high percentage of these defaulters attended for-profit colleges. But apparently those casualties are acceptable to Betsy DeVos.

Public Service Loan Forgiveness Program.

Hundreds of thousands of student debtors have taken jobs in the public sector in belief that their student loans would be forgiven after 10 years under the Public Service Loan Forgiveness Program (PSLF). It now seems they were deluded.

PSLF was enacted by Congress in October 2007, so the first people entitled to PSLF relief became eligible in October 2017. So far, 28,000 people have applied for PSLF relief, but only 300 claims have been approved and only 96 people have actually had their loans forgiven!

If Betsy DeVos and her gang of former for-profit-college hacks continue to refuse to implement PSLF in good faith, hundreds of thousands of college borrowers who relied on PSLF will suffer incalculable hardship.  For example, thousands of people have graduated from third- and fourth-tier law schools with six-figure debt, and they can't find law jobs in the private sector that pay enough to service their student-loan obligations. As Paul Campos pointed out in his book Don't Go to Law School (Unless), PSLF is these people's only viable option for paying off their law-school loans.

Conclusion: The Student Loan Program is in Fine Shape: "10 to 20 Million Casualties, Tops!"

DOE's own data shows us that the federal student loan program is a disaster: high default rates, income-driven repayment plans that don't allow people to pay off their loans,  borrower-defense rules that DOE administers incompetently, and a PSLF program that DOE refuses to implement in good faith. Meanwhile, the for-profit gang is getting rich.

Literally, there are at least 20 million casualties. Betsy DeVos must think 20 million casualties is acceptable, but I do not. Why don't our  politicians--Republicans and Democrats-- begin to behave like grownups and impeach Betsy DeVos, who is running DOE like a character in Dr. Strangelove.

10 to 20 million casualties--tops!

LGBTQ Student Organizations and the Equal Access Act: Betsy DeVos Has No Power to Restrict the Protections of the EAA

By Richard Fossey & Todd A. DeMitchell 

Originally posted at Berkley Forum, the blog site for Georgetown University's Center For Religion, Peace and World Affairs.

In 1984, Congress passed the Equal Access Act, which prohibits secondary schools that receive federal funds from discriminating against non-curriculum-related student groups based on their political, philosophical, or religious viewpoint. Thus, if a high school permits any non-curriculum-related student group to use its school facilities, it must allow other student groups equal access, without regard to the group’s viewpoint.

In adopting the EAA, Congress intended to advance the right of Christian student groups to use school facilities during non-instructional hours; and it clearly accomplished that goal. In Board of Education v. Mergens, a 1990 opinion, the United States Supreme Court upheld the constitutionality of the EAA, rejecting a school district’s argument that the Act violated the Establishment Clause.

Litigation Involving Gay Student Groups Seeking to Exercise Their Rights Under the EAA

Not long after the law was passed, LGBTQ student groups, which sometimes called themselves Gay Straight Alliances (GSA), sought the same rights as religious groups under the EAA, and a few school districts refused to recognize them. The GSAs sued in federal court, and they almost always won.

For example, a California school district argued that a GSA would introduce discussions of sexuality that were age inappropriate and would disrupt the school environment. A federal court rejected that argument, noting that a student club that focuses on sexuality might actually prevent school disruptions that can take place when students are harassed based on sexual orientation.

Likewise, a Kentucky school district maintained that it was legally entitled to shut down a GSA because the school board’s recognition of the group had triggered a boycott by anti-gay students. But a federal court disagreed. To allow disruptive anti-gay students to nullify the GSA’s legal right to meet, the court ruled, would amount to a “heckler’s veto” of constitutionally protected speech.

Ten years ago, we analyzed all published court decisions involving GSAs seeking to exercise their rights under the EAA, and we identified only one decision in which a federal court allowed a school district to ban a GSA while recognizing other student clubs. In Caudillo v. Lubbock Independent School District, a Texas school district refused to recognize a gay student group and the group filed suit. A federal district court upheld the school district’s decision on the grounds that the gay student group had created a web site with links to other web sites that the judge ruled were obscene.

Since our article was published, there have been a few more lawsuits filed by GSAs seeking recognition from school districts under the EAA, and they have generally prevailed. For example, in a 2016 case, a Florida school district refused to recognize a GSA organized by middle-school students on the grounds the EAA applied only to secondary schools and the district’s middle school was not a secondary school. The Eleventh Circuit Court of Appeals rejected that argument, ruling emphatically that a middle school is a secondary school subject to the EAA.

Can Betsy DeVos Diminish LGBTQ Students’ Rights under EAA?

Betsy DeVos, President Trump’s Secretary of Education, has diminished the U.S. Department of Education’s role in protecting the civil rights of LGBTQ students. As the Brookings Institution reported, DeVos has consistently declined to say whether DOE will protect LGBTQ students from discrimination. Earlier this year, the Department’s Office of Civil Rights announced it would stop accepting complaints about transgender students not having access to school bathrooms that match their gender identity. Is it possible DeVos might restrict LGBTQ students’ legal right to form GSAs in public high schools?

We do not believe DeVos can water down the EAA’s protections for GSAs, even if she tries to do so. The EAA is a federal statute that Congress is unlikely to repeal or amend, and federal courts are virtually unanimous in holding that the EAA guarantees the right of GSAs to organize in all public high schools where other non-curriculum related groups have formed.

Perhaps more importantly, the EAA has been in place for 34 years, and few school districts have refused to abide by its provisions. All across the United States, conservative Christian student groups and GSAs have met on high school campuses with little or no friction, and most school authorities are more than willing to allow GSAs to organize and meet.

In short, Betsy DeVos may reduce DOE’s role in protecting the civil rights of LGBTQ students, but she cannot extinguish their legal right to form GSAs in public high schools. Happily, the federal courts will stop her if she tries.

Ben Miller, where the hell ya been? Center for American Progress finally wakes up to the magnitude of student-loan crisis

Ben Miller, senior director of the Center for American Progress, reminds me of a fuddy duddy who falls asleep at a wild party in a friend's apartment.  Just as the party starts to get interesting, he nods off on a pile of party goers' coats.

 Meanwhile, the party spins out of control: fights break out, spontaneous trysts are consummated in closets and spare bedrooms, furniture is broken, lamps are shattered. When the fuddy duddy awakes, the apartment is in shambles and the police are cuffing drunken revelers and hauling them off to jail.

"Did I miss something?", the fuddy duddy asks as he rubs the sleep from his eyes.

Miller wrote an op ed essay for the New York Times on August 8 titled "The Student Debt Problem is Worse Than We Imagined?" Ya think? Where the hell have you been, Mr. Miller?  You're like the guy who went out to buy popcorn just before the steamy scene in Last Tango in Paris.

So here is what Mr. Miller said in his op essay: student loan default rates are much higher than the Department of Education reports. I hate to break it to you, Ben; but people have known that for years. Everybody knows the for-profit colleges have been hiding their default rates by pushing their former students into deferment programs to disguise the fact the suckers weren't paying on their loans.

In fact, the problem is probably worse that Miller described it in the Times. Looney and Yannelis reported in 2015 that the five-year default rate for the 2009 cohort of student borrowers was 28 percent (Table 8).  And the five year default rate for the 2009 cohort of for-profit students was 47 percent--almost double what Miller reported for the 2012 cohort--only 25 percent.

Admittedly, Miller is looking at the 2012 cohort of debtors, while Looney and Yannelis analyzed the 2009 cohort. But surely no on believes the student-loan problem got better in recent years. Everyone knows the crisis is getting worse.

Miller's analysis briefly mentions the federal push to put student borrowers in deferment plans,  but that problem is more serious than Miller intimates. In fact 6 million student borrowers are in income-based repayment plans (IBRPs) and are making payments so small their loan balances are getting larger and larger with each passing month due to accruing interest.  For all practical purposes, the IBRP participants are also in default.

But Mr. Miller can be forgiven for waking up late to smell the coffee. Perhaps Miller, like the New York Times that published his essay, was so distracted by Stormy Daniels and the Russians that he was late to notice that American higher education is going down the toilet.  And surely, we can all agree that the person pressing down on the toilet-bowl handle  is Betsy DeVos.

What happened while Center for American Progress was snoozing?

References

Adam Looney & Constantine Yannelis, A crisis in student loans? How changes in the characteristics of borrowers and in the institutions they attended contributed to rising default rates. Washington, DC: Brookings Institution (2015). Accessible at: http://www.brookings.edu/about/projects/bpea/papers/2015/looney-yannelis-student-loan-defaults

Ben Miller. The Student Debt Problem is Worse Than We Imagined. New York Times, August 8, 2018.

A Deep Dive Into the Debtor Blaming 2018 Borrower Defense to Repayment Regulations. Essay by Steve Rhode

By Steve Rhode (originally posted on July 25, 2018)

Today the Department of Education (ED) has released their new rules for the program so let’s jump in and see what the Borrower Defence to Repayment program now looks like. I’m going to read the 433 pages so you don’t have to.The Department of Education put a hold on forgiving federal student loans for students who were victims of fraud by the schools that enrolled them. Under the Obama administration, the program would suspend collections activity while claims were being investigated and total forgiveness was a possible outcome.

Under the Trump administration claims were not approved and the rules were changed to only allow a partial forgiveness for most debtors based on an impractical standard.

It appears ED is trying to shift the responsibility for making good decisions for enrolling in questionable schools by pushing that obligation and blame on the student. The new rules say, “The goal of the Department is to enable students to make informed decisions on the front end of college enrollment, rather than to grant them financial remedies after-the-fact when lost time cannot be recouped and new educational opportunities may be sparse. Postsecondary students are adults who can be reasonably expected to make informed decisions and who must take personal accountability for the decisions they make.”

While ED says educational institutions should not mislead the students and “remedies should be provided to a student when misrepresentation on the part of an institution causes financial harm to that student,” let’s see how much power and practicality those remedies have.

The ED again turns back to putting the responsibility and blame on the student for enrolling in the wrong school that may have misled them. ED says, “students have a responsibility when enrolling at an institution or taking student loans to be sure they have explored their options carefully and weighed the available information to make an informed choice.”

But what seems to be missing from that lofty goal is some sort of pre-screening by the school to review the cost of the education and the expected salary for the chosen field. For example, the other day I wrote about the $90,000 associates degree in web design. Does the school have a responsibility to sell a fair product or is the responsibility now focused on the student for believing the hype?

ED says, “The Department has an obligation to enforce the Master Promissory Note, which makes clear that students are not relieved of their repayment obligations if later they regret the choices they made.” So if your 18-year-old self made a bad choice of schools that provided an overpriced education with little value, that’s your own damn fault.

The proposed rule document says, “As of January 2018, it had received 138,989 claims, of which 23 percent had been processed.” Some of these claims go back more than a year.

It is quite possible those became a major issue with the new ED because Borrower Defense Claims were being submitted and approved. These claims were not approved on no basis but because students had been misled or deceived by the school.

But here is where ED is turning the table on debtors, “the Department is concerned that several features of the 2016 final regulations might have put the Department in the untenable position of forgiving billions of dollars of Federal student loans based on potentially unfounded accusations. Specifically, those regulations would allow the Department to afford relief to borrowers without providing an opportunity for institutions to adequately tell their side of the story.”

These new rules say, students who feel they were misled and deceived by schools to get them to enroll and take out federal student loans, may still submit claims but as long as they are “not in a collections status.” So students who were saddled with questionable loans by a questionable school will have to continue to make monthly payments or stay out of collections while their claim is processed for an undetermined amount of time.

ED wants to encourage students to enroll in income-driven repayment plans and make payments on their loans. These would be the same plans that put people into decades-long repayment plans with potentially big tax bills at the end. Balances in these programs go up, not down, as the monthly payment is insufficient to cover the interest building.

ED is worried that students claiming they were harmed by their schools will strategically default on their otherwise unaffordable debt. As evidence to support this concern, ED cites research by those who intentionally defaulted on their mortgage payments to take advantage of mortgage modifications. Talk about apples and oranges here.

“The Department is trying very carefully to balance relief for borrowers who have been harmed by acts of institutional wrongdoing, with its obligation to the taxpayer to provide reliable stewardship of Federal dollars.” And while that might be true, then why isn’t the Department limiting access to federal funds by schools that engage in questionable practices?

Those questionable practices have led to massive amounts of unaffordable student loan debt sitting in a non-payment status. The lack of oversight by ED to rein in the access to federal student loan dollars by typically for-profit schools who have been approved by questionable accreditation.

So ED says, “With more than a trillion dollars in outstanding student loans, the Department must uphold its fiduciary responsibilities and exercise caution in forgiving student loans to ensure that it does not create an existential threat to a program that lacks typical credit and underwriting standards.”

But where were the underwriting standards for schools selling degrees that students would never be able to afford to repay? Where was the fiduciary responsibility for ED and student loan debtors?

ED appears to say they are not going to get involved in resolving disputes or claims of wrongdoing against schools. That is going to be left up to the individual student to fight with the school through the courts. How students will be able to afford to do that, is a mystery.

And ED is not going to block schools from forcing students into secret arbitration or stopping schools from allowing students to enter class action suits against the schools. Instead, ED says in its press release on the rulemaking “that institutions requiring students to engage in mandatory arbitration or prohibiting them from participating in class action lawsuits provide plain language explanations of these provisions to enable students to make an informed enrollment decision.” So students who decide to go to schools that block access to courts to remedy claims were stupid to enroll.

Here is what the rule says, “it seems reasonable that consumer complaints should continue to be adjudicated through existing legal channels that put experienced judges or arbitrators in the position of weighing the evidence and rendering an impartial decision.”

Even with the Borrower Defense to Repayment program in place, ED again takes the step to say the student was the idiot in this situation when they enrolled at a school they believed. ED says, “As stated in the Master Promissory Note the borrower signs when initiating their first loan, the borrower is expected to repay the loan even if the borrower fails to complete the program or is dissatisfied with the institution or his or her outcomes.”

On the issue of a group discharge of federal student loans if a school is found to have engaged in “a misrepresentation made with knowledge of its false, misleading, or deceptive nature or with a reckless disregard for the truth,” ED punts and says that will be the focus of a different rule. This appears to close the door for bulk discharges of schools found guilty of deception, like in the Corinthian Colleges case.

As evidence why the group discharge would be harmful to students, ED says “Because an institution can refuse to provide an official transcript for a borrower whose loan has been forgiven, group discharges could render some borrowers unable to verify their credentials or work in the field for which they trained and have enjoyed employment.” Maybe the real answer is that is a school was found to deceive students they should still have to provide a transcript.

In the past, schools who enrolled students who never graduated from high school or had a GED could be found to have taken advantage of people who may not have been qualified to enroll in higher education. The proposed rule shifts the burden back to the uneducated student when it says, “We also propose changes to the Department’s current false certification regulations. The Department believes that in cases when the borrower is unable to obtain an official transcript or diploma from the high school, postsecondary institutions should be able to rely on an attestation from a borrower that the borrower earned a high school diploma since the Department relies on a similar attestation in processing a student’s Free Application for Federal Student Aid (FAFSA).”

Where is the underwriting in this process that ED says it engages in?

These new rules would apply to federal student loans first disbursed on or after July 1, 2019.

They would also “require a borrower to sign an attestation to ensure that financial harm is not the result of the borrower’s workplace performance, disqualification for a job for reasons unrelated to the education received, a personal decision to work less than full-time or not at all, or the borrower’s decision to change careers.”

Feel free to read the entire document, here.

My impression of the proposed new rules is the Department of Education wants to shift all the responsibility for falling for school marketing overpriced education to the least informed person in this transaction, the student.

It doesn’t take a crystal ball to see how this is going to work out. Badly for debtors.

If ED is worried about underwriting and a fiduciary responsibility then why are they passing out easy loans with little regard to affordability, to begin with? Does the government have a duty to protect it’s citizens or does it need to protect its poor financial decision making and schools they pump loans through? Or is this new policy all about blaming the victim instead of investigating the claims for validity?

Steve's essay was originally posted on The Get Out of Debt Guy web site.

*****

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here. 

Divorce, birth rates and home ownership: All are negatively affected by crushing student-loan debt

According to Student Loan Hero, about 1 out 8 divorcees queried in a recent survey said that the student loans they took out before getting married eventually led to their divorce.  And the survey also found that more than a third of couples with student debt delayed their divorce because they couldn't afford the expense.

Apparently, student loans are now such a significant marital problem that one New York attorney recommends couples sign a prenuptial agreement specifying that the person helping to pay off the spouse's student loans gets reimbursed in case of a divorce. How romantic!

Experts have long agreed that money problems put a strain on marriages, but student loans are a particularly nasty form of debt. No wonder so many divorcees cited student loans specifically as a major cause of their marital split. Unlike car loans, credit card debt and home mortgages, student-loan debt is almost impossible to discharge in bankruptcy. Moreover, student-loan borrowers have huge penalties slapped on their college-loan debt if they default--25 percent of the amount owed, including unpaid interest.

The Student Loan Hero survey is only the most recent evidence of the pain Americans are suffering from student loans. Earlier this month, the New York Times reported that Americans are having fewer babies; and college loans are one of the reasons.

The Times conducted a survey of men and women in the 20-to-45 age group, and almost two thirds said they planned to have fewer children than their ideal because of financial concerns.  Among people who said they planned to have no children, 13 percent cited student debt.

And the Federal Reserve Bank of New York documented last year that student debt was negatively affecting the housing market. A 2017 Federal Reserve Bank report observed that home ownership among young people declined by 8 percent over an 8-year period (2007 to 2015);  and the Feds concluded that a substantial reason for this decline is rising levels of student-loan debt.

The Fed report also observed that more young Americans are living with their parents than in previous years. In 2004, about one third of 23-25-year-olds lived with their parents. In 2015, 45 percent of people in this age bracket were living with mom and dad--a big increase.

None of this bad news should be surprising as Americans borrow more and more money to go to college. In 2002, only 20 percent of student borrowers owed $20,000 or more. Last year, 40 percent of student debtors owed that much or more. And borrowers owing $50,000 or more jumped from 5 percent to 16 percent during the same time period.

Remarkably, almost no one in the higher education industry even acknowledges a problem with soaring student-loan debt. If there is a problem, the industry flacks tell us, the easy solution is extended repayment terms. Simply force Americans to pay back their loans over 20 years or even 25 years, university insiders insist.

Do you suppose Betsy DeVos thinks about distressed student borrowers when she sips her martinis on her $40 million yacht, the Seaquest? I doubt it. Based on the way she's running the Department of Education, my guess is that she worries more about protecting the predatory for-profit colleges than the students who got swindled by them.

And who do you suppose Betsy is more likely to invite for drinks on the Seaquest--a single mom who defaulted on a loan she took out to attend the University of Phoenix or an equity-fund manager who owns part of the University of Phoenix?

Betsy DeVos's $40 million yacht--193 feet long!

References

Moriah Balingit. Someone untied Betsy DeVos's yacht in Ohio. Damage Ensued. Washington Post, July 26, 2018.

Jessica Dickler. 1 in 8 divorces is caused by student loans. CNBC.com., July 27, 2018.

Ben Luthi. Survey: Student Loan Borrowers Wait Longer and Pay More to Get Divorced. Student Debt Hero, July 24, 2018.

Claire Cain Miller. Americans Are Having Fewer Babies. They Told Us Why. New York Times, July 5, 2018.

Rick Seltzer. Percentage of Borrowers Owing $20,000 or More Doubled Since 2002. Inside Higher Ed, August 17, 2017.

Zachary Bleemer, et al. Echoes of Rising Tuition in Students' Borrowing, Educational Attainment, and Homeownership in Post-Recession America. Federal Reserve Bank of New York Staff Report No. 820, July 2017.

Steve Rhode. Student Loan Debt Hurts Economy, Consumers, and Retirement Savings. Personal Finance Syndication Network, September 2017.

Betsy DeVos, the for-profit college industry's best pal, rolls back regulatory protections for students who were defrauded by for-profit colleges

This week, Betsy DeVos, President Trump's lamentable Secretary of Education, proposed new rules for implementing the Department of Education's Borrower Defense to Repayment Program.

The new rules--433 pages long--outline the DeVos regime's procedures for processing fraud claims filed by students who took out federal loans to attend for-profit colleges and were swindled.  The New York Times and Steve Rhode of Get Out of Debt Guy reported on this development, but Rhode's analysis is more comprehensive and insightful than the Times story. Rhode's essay is the one to read.

Millions of Americans have been defrauded by for-profit colleges--literally millions. Corinthian Colleges and ITT Tech filed for bankruptcy, brought down by regulatory pressures and fraud allegations. Those two institutions alone had a half million former students.

Globe University and Minnesota School of Business both lost their authority to operate in Minnesota after a Minnesota trial court ruled they had misrepresented their criminal justice programs.  Last month, the Minnesota Court of Appeals partially upheld the trial court's judgment, finding sufficient evidence to support a fraud verdict on behalf of 15 former students who testified at trial.

In California, DeVry University agreed to pay $100 million to settle claims brought by the Federal Trade Commission that it had advertised its programs deceptively. In the wake of that scandal, the company owning DeVry changed its name from DeVry Education Group to Adtalem Global Education.

The Art Institute, which charged students as much as $90,000 for a two-year associates' degree,
agreed to pay $95 million to settle fraud claims brought against it by the Justice Department, but the settlement is paltry compared to the amount of money borrowed by 80,000 former students.  And there have been numerous small for-profits that have been found liable for fraud, misrepresentation, or operating shoddy programs.

The for-profit scandal is a huge mess. If every student who was defrauded or victimized in some way by a for-profit college were to receive monetary restitution, it would probably cost taxpayers a half trillion dollars.

So how do we fix this problem? The Obama Administration approved rules that would have streamlined the process for resolving student-fraud claims, but Betsy DeVos pulled back those rules just before they were to have been implemented.

The new DeVos rules, summarized by Steve Rhode, put most of the blame on students for enrolling in these fraudulent and deceptive for-profit colleges. According to DeVos' DOE, "students have a responsibility when enrolling at an institution or taking student loans to be sure they have explored their options carefully and weighed the available information to make an informed choice."

DeVos' janky new rules forces fraud victims to continue paying on their student loans while they process their damned-near hopeless fraud claims, while DOE processes those claims--if at all--at a snail's pace.

DeVos nixed the Obama administration's ban against mandatory arbitration clauses that the for-profits have forced students to sign as a condition of enrollment. Sometimes these clauses also bar class action suits. So under Betsy DeVos' administration, many defrauded students will be barred from suing the institutions that cheated them.

Betsy and her for-profit cronies want struggling student debtors to enroll in long-term income-based repayment plans (IBRPs) that last from 20 to 25 years. Payments under those plans are generally so low that student debtors' loan balances are negatively amortizing. Borrowers in IBRPs will see their loan balances go up month by month even if they make regular monthly payments. In other words, most IBRP participants will never pay off their loans.

Some people are predicting the student-loan scandal will eventually lead to a national economic crisis similar to the one triggered by the home-mortgages meltdown. I am beginning to think these doomsday predictors are right. Already we see that student loans have impacted home ownership and may even be a factor in the nation's declining birth rates--now so low that the American population is not replacing itself.

Two things must be done to destroy the for-profit college cancer that is destroying the hopes of millions for a decent, middle-class life:

1) First, the for-profit college industry must be shut down. No more University of Phoenixes, no more DeVrys, no more Florida Coastal Universities.

2) Second, everyone who was swindled by a for-profit school should have easy access to the bankruptcy courts, so they can shed the debt they acquired due to fraud or misrepresentations and get a fresh start in life.

And there is a third thing we need to do. Congress should impeach Betsy DeVos for reckless dereliction of duty and blatant misconduct against the public interest.  Let's send her back to Michigan, where she can enjoy her family fortune as a private citizen and not as a so-called public servant.

References

Mark Brunswick. Globe U and Minn. School of Business must close, state says after fraud ruling. Star Tribune, September 9, 2016. 

Christopher Magan. Globe U. and Minnesota School of Business to start closing campuses. Twin Cities Pioneer Press, December 21, 2016.

State of Minnesota v. Minnesota School of Business, A17-1740, 2018 Minn. App. LEXIS 277 (Minn. Ct. App. June 4, 2018).

Sarah Cascone, Debt-Ridden Students Claim For-Profit Art Institutes Defrauded Them With Predatory Lending Practices.  Artnet.com, July 23, 2018.

Erica L. Green. DeVos Proposes to Curtail Debt Relief for Defrauded Students. New York Times, July 5, 2018.

Claire Cain Miller. Americans Are Having Fewer Babies. They Told Us Why. New York Times, July 5, 2018.

Steve Rhode. A Deep Dive Into the Debtor Blaming 2018 Borrower Defense to Repayment Program. Get Out of Debt Guy (blog), July 25, 2018.

Reuters. DeVry University agrees to $100 million settlement with U.S. FTC. Reuters,  December 15, 2016.

The New York Times lambasts Republicans and Betsy DeVos for catering to for-profit colleges: The Gray Lady overlooks culpable Democrats

In an editorial last month, The New York Times lambasted Secretary of Education Betsy DeVos, the Trump administration and congressional Republicans for protecting the greasy for-profit college industry. "Try as they might," the Times observed, "the Trump administration and Republicans in Congress cannot disguise that they continue to do the bidding of the for-profit industry, which has saddled working-class students--including veterans--with crushing debt while providing useless degrees, or no degrees at all."

Indeed, the Times grumbled, the Department of Education, under DeVos, "has undermined investigations of the [for-profit college] industry by marginalizing or reassigning lawyers and investigators . . ." Major investigations, the Times reported, have been abandoned, including investigations into the activities of DeVry Education Group, Bridgepoint Education and Career Education Corporation.

The Times is right of course. Betsy DeVos is the shameless lapdog of the for-profit college crowd, which continues to prey on unsophisticated Americans seeking to get a worthwhile education.  The Times predicts that DeVos' behavior may come back to bite the Republicans in the upcoming midterm elections, and perhaps there will be repercussions at the ballot box.

But to be fair, servile obsequiousness to the for-profit colleges is bipartisan. Both Democrats and Republicans have taken campaign contributions from these bandits and both parties have succumbed to the blandishments of the for-profit lobbyists.

In fact, The Nation reported nearly five years ago that two Democratic congressmen were leading an effort to protect for-profit colleges from meaningful regulation.  According to The Nation's reporter Lee Fang, Representative Rob Andrews from New Jersey and Florida congressman Alcee Hastings had taken thousands of dollars from for-profit college executives and for-profit backed political committees.

Andrews is no longer in Congress, but Alcee Hastings is still in office. This is the same Hastings, by the way, who, while sitting as a federal district judge, was charged with bribery, perjury and falsifying documents.  The U.S. Senate impeached him and removed him from his judicial post in 1989.

If the Democrats want to distinguish themselves from their Republican colleagues, they need to speak out forthrightly about the for-profit-college scandal. In my view, the for-profit racketeers cannot be tamed through tougher regulations. The only way to stop these predators from stalking unsuspecting and naive young Americans is to shut the industry down. But the Democrats don't have the courage to speak out against the for-profit mobsters. They seem to hope Americans will overlook their silence about the the for-profit college industry and pin all the blame on the Republicans.

Rep. Alcee Hastings (D-Florida): Friend of the for-profit college industry

References

Editorial. Predatory Colleges, Freed to Fleece Students. New York Times, May 22, 2018.

Lee Fang. Two House Democrats Lead Effort to Protect For-Profit Colleges, Betraying Students and Vets. The Nation, December 13, 2013.

United States Senate.  The Impeachment Trial of Alcee L. Hastings (1989) U.S. District Judge, Florida.

Betsy DeVos is shilling for debt-collectors and for-profit colleges: The destruction of Americas's middle class

The New York Times published an editorial this week strongly criticizing Secretary of Education Betsy DeVos, whom the Times accurately describe as a "shill" for the student-loan industry.

As the Times reported, DeVos' Department of Education has issued a new policy statement that says federal law can preempt state consumer-protection laws aimed at curbing abuses in the loan-servicing and debt-collection business.  DeVos' Department argues that state consumer-protection laws can undermine uniform administration of the student loan program.

The Times also criticized the Republican-sponsored bill to reauthorize the Higher Education Act. This bill, if it becomes law, will preempt the right of the states to regulate the student-loan business--including student-loan debt collectors and loan servicers.

Betsy DeVos' craven and servile pandering to the student-loan industry is a scandal; and DeVos--not the Russians--should be the focus of Democratic attacks on the Trump administration.  DeVos' behavior belies all the blather coming out of the White House about how Trump policies benefit the middle class. DeVos apparently hopes to remove all restraints on the venal and corrupt student-loan business, which is doing a pretty good job of dismantling the middle class.

In fact, the federal student-loan program is a disaster, with millions of casualties as student borrowers are pushed into default or into long-term repayment plans that never pay off borrowers' loan balances.

Here's what can be done to stop DeVos' mad-dog scheme to line the pockets of her debt-collector cronies:

1) The state attorney generals should sue Betsy DeVos and DOE every time they attempt to dismantle the states' proper role of protecting consumers from fraud.  As the Times noted, this is what the state AGs are doing.

2) Other states should follow the example of the Massachusetts Bar Association and the Massachusetts Attorney General  and organize teams of volunteer lawyers to represent distressed student-loan debtors in the bankruptcy courts.  If just a few more state AGs joined the Bay State--California, Florida, Illinois, and Texas, for example--I believe the bankruptcy courts would begin revising their harsh attitude toward college borrowers in the bankruptcy courts.

3) The Democrats should take every opportunity to question Trump administration officials under oath about the activities of the student-loan guarantee companies who act as DOE's debt collectors. Why do four of these agencies--nonprofit organizations--individually hold $1 billion in assets while they hound elderly debtors in the bankruptcy courts.  Let's see a breakdown of the attorney fees these agencies are paying to hire asshole lawyers to crush student-loan debtors.

Everyone of good will should take heart at Fed Reserve Chair Jerome Powell's candid admission that he could not explain why the Bankruptcy Code treats student-loan debtors so harshly--basically putting them in the same category as criminals.

As someone once said, when a thing can't go on forever, it won't. The abuses of the federal student loan program can't go on forever. More than 40 million borrowers collectively owe $1.5 trillion in student loans (including private loans); and about half of these borrowers will never repay their debt.

The Federal Reserve Bank of New York and other agencies have documented that student-loan debt is hurting the economy--preventing people from buying homes and saving for retirement.

The time has come for American society to decide: Do we want to continue enriching a bunch of crooks in the for-profit college business and the debt-collecting racket or do we want a middle class?

We know Betsy DeVos' answer: she wants to enrich her corrupt buddies even if she helps destroy the middle class.


References

The Student Loan Industry Finds Friends in Washington. New York Times, March 18, 2018.

Robert Shireman and Tariq Habash. Have Student Loan Guaranty Agencies Lost Their Way? The Century Foundation, September 29, 2016.