Showing posts with label Century Foundation. Show all posts
Showing posts with label Century Foundation. Show all posts

Wednesday, March 13, 2019

It's Magic! Betsy DeVos' Department of Education allows Grand Canyon University to call itself non-profit while its parent company reports profit margin of 27 percent

David Halperin, the nation's best investigative reporter on the for-profit college industry, wrote an article recently on Grand Canyon University, which has been advertising lately that it is a non-profit university.

Well, sorta. As Halperin explained, Betsy DeVos' Department of Education "has blessed a series of troubling deals that allow a [not-]for profit college to be 'serviced by connected for-profit companies."

To what purpose?As Halperin reported:
The non-profit school benefits from the elimination of the for-profit stigma, reduced regulations, elimination of taxation, and eligibility for more state and charitable grants. Meanwhile, the for-profit, and its owners and executives, get to siphon off a lot of the revenue, much of it from taxpayer-funded grants and loans.
Thus in the fairyland world that Betsy DeVos has created, Brian Mueller wears two hats. He is president of Grand Canyon, a non-profit entity. He is also CEO of the university's parent for-profit corporation, Grand Canyon Education.  GCE trades on NASDAQ at $115 a share and reported a profit margin of 27 percent at the end of 2018.

Mueller conducted an earnings call to his investors recently in which he complained about non-profit colleges warning potential students not to enroll at a for-profit college. Through DeVos' mumbo jumbo, Grand Canyon can now call itself a nonprofit college, which has boosted its enrollment.

As Mueller boasted: "They see our ad & call Grand Canyon and within 72 hours everything is done. Applications filled out. Transcripts evaluated. Financial aid is done. They go to our website, they see who Grand Canyon is and say, 'this sounds good,' and they start."

As Halperin accurately observed, "the Donald Trump-Betsy DeVos Department of Education . . . has done everything possible to eliminate rules that protect students and taxpayers from predatory college abuses."

In fact, according to a Century Foundation report, which analyzed colleges with large online enrollments, Grand Canyon only spends 17 percent of its tuition money on educating students (as summarized by Halperin). Some non-profit!

I once thought that DeVos was simply incompetent and making decisions that benefited for-profit colleges out of ignorance. But DeVos knows exactly what she is doing, and she must know that the for-profit college industry as a whole is committing economic rape on unsophisticated young people, including first-generation college goers.

In a November speech, DeVos admitted that the student-loan program is in crisis. This is what she said:
  • 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.
Of course, the for-profits aren't responsible for all the carnage in the student-loan program, but they are responsible for a lot of it. Adam Looney and Constantine Yannelis, writing for the  Brookings Institute, reported awhile back that the 5-year default rate for one cohort of students who attended for-profit colleges was 47 percent! Several for-profits have been shut down in a shower of fraud allegations.

But even for DeVos, this latest scheme, which allows a college to call itself non-profit while its for-profit parent reports a profit margin of 27 percent, is outrageous.


President of Grand Canyon University and CEO of Grand Canyon Education.










Tuesday, November 14, 2017

Department of Education Coming to Jesus Moment With For-Profit Schools. Article by Steve Rhode

By  on November 10, 2017
99 percent of student loan fraud claims come from for-profit colleges and schools.
I’d love to tell you I absolutely think the current Trump administration Department of Education is going to get the message that for-profit colleges are problematic, but I doubt it.
The Century Foundation has obtained data from the U.S. Department of Education through a Freedom of Information Act (FOIA) request which paints a very clear picture of issues surrounding for-profit schools and student loan fraud issues. I can’t wait to see the magic the Department of Education uses to make these facts go away or not be relevant.
Out of the total of 98,868 complaints reviewed by TCF, for-profit colleges generated more than 98.6 percent of them (97,506 complaints). Of these complaints nonprofit colleges generated 0.79 percent (789 complaints) and public colleges generated 0.57 percent (559 complaints).
Approximately three-fourths of all claims (76.2 percent) were against schools owned by one for-profit entity, the now-closed Corinthian Colleges (75,343 claims). Removing Corinthian from the analysis, the vast majority of claims, over 94 percent, were still against for-profit colleges (22,160 of the 23,525 non-Corinthian claims).
Claims are concentrated around fifty-two entities—forty-seven for-profit companies and five nonprofit institutions—that have each generated twenty or more borrower defense claims. Of these five nonprofits, three converted from for-profit ownership.
The backlog of fraud complaints—currently numbering 87,000 not yet reviewed—is increasing, with the number of new claims submitted per month averaging approximately 8,000 since mid-August.”
The data uncovered while for-profit schools account for ten percent of student enrollment the students who attended were 1,100 times more likely to file a fraud claim.

*******

This article appeared on The Get Out of Debt Guy 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.

Wednesday, May 3, 2017

Senator Elizabeth Warren and Senate progressives should press for hearings on Educational Credit Management Corporation and the student loan crisis

Senator Elizabeth Warren has had a brilliant career. She grew up in Oklahoma, went to law school, and wound up on the Harvard Law School faculty. Now she is in the U.S. Senate, and pundits say she may run for President in 2020. Impressive!

Somewhere along the way, Senator Warren represented that she had Cherokee blood, although she never provided a shred of evidence to support that assertion. Her claim may have been a factor in getting that cushy Harvard Law School job. But Harvard says no, and Harvard always tells the truth.

Nevertheless, Harvard Law School claimed it had a Native American professor while Warren was on the faculty, without identifying who it was. (To be fair, it may have been Alan Dershowitz).

If Warren misrepresented her heritage to advance her career, we can't be too hard on her. Higher education is a rough business, and Warren certainly played the game better than I did. And, as the song goes that Willie Nelson made famous, Liz only did what she had to do.

But Warren is a senator now, and she has an obligation to do some good for the American people. She claims to be an advocate for distressed student-loan debtors, but what has she done for them?

She's written letters to the Department of Education and spouted a lot of nonsense about the "obscene" profits the government makes off the student-loan program. More substantively, she co-sponsored a bill in 2015 to protect seniors from having their Social Security checks garnished, but the bill never became law.

In my view, Senator Warren could do more to address the student loan crisis than file bills and write letters. Specifically, she should join with other progressives in the Senate and press for Senate hearings on the student loan guaranty agencies and Educational Credit Management Corporation in particular. ECMC is perhaps the federal government's most ruthless debt collector and has amassed a billion dollars in unrestricted assets, at least partly from hounding destitute student debtors.

In the Bruner-Halteman case, for example, ECMC garnished the wages of a bankrupt Starbucks employee 37 times in violation of the Bankruptcy Code's automatic stay provision. A Texas bankruptcy slapped ECMC with $74,000 in punitive damages.

And in the Hann case, ECMC continued trying to collect on a woman's student loans even though a bankruptcy court had discharged those loans on the grounds that she had paid them off.  ECMC only got stung with a small penalty for that misbehavior.

Rafael Pardo and the Century Foundation both established that the federal government is paying ECMC's attorney fees, and ECMC is using its attorneys to ground down overburdened student borrowers in the bankruptcy courts. Many of these destitute people don't have the money to hire a lawyer, but ECMC is paying its lawyers as much as $300 an hour.

The public has no idea what ECMC has been up to, and Senate hearings could shine some light on this sleazy organization. How much is ECMC paying its CEO, Jan Hines, and its other senior executives? What is ECMC doing with its wealth? Why does the Department of Education pay ECMC's attorney fees to engage in what Rafael Pardo described as "pollutive litigation"?

Senator Warren could do a great deal of good if she would use her powers of persuasion to get the Senate Banking Committee to hold hearings on ECMC's shady activities. In fact, if Senator Warren got the opportunity to ask ECMC executives some tough questions, I'll bet she could bring this rotten outfit down.

Senator Warren needs to accomplish something tangible to address the student loan crisis if she wants people to regard her as a consumers' advocate. If she doesn't accomplish something soon, Americans will be forced to conclude she is not really a progressive, just as we know she's not really a Cherokee.


How much does ECMC pay its CEO, Jan Hines?

References

Bruner-Halteman v. Educational Credit Management Corporation, Case No. 12-324-HDH-13, ADV. No. 14-03041 (Bankr. N.D. Tex. 2016).

Hann v. Educational Credit Management Corporation, 711 F.3d 235 (1st Cir. 2013).

John Hechinger. Taxpayers Fund $454,000 Pay for Collector Chasing Student LoansBloomberg.com, May 15, 2013.

Joshua Hicks. Did Elizabeth Warren check the Native American box when she "applied" to Harvard and Penn? Washington Post, September 28, 2012.

Natalie Kitroeff. Loan Monitor is Accused of Ruthless Tactics on Student DebtNew York Times, January 1, 2014.

Rafael Pardo. The Undue Hardship Thicket: On Access to Justice, Procedural Noncompliance, and Pollutive Litigation in Bankruptcy. 66 Florida Law Review 2101 (2014).


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

Brian Walsh. Elizabeth Warren is Rewriting American HistoryU.S. News & World Report, April 22, 2014.

Wednesday, March 29, 2017

Bank of America hit with $45 million punitive damages award for violating automatic stay provision of Bankruptcy Code: ECMC take notice!

A few days ago, Judge Christopher Klein, a California bankruptcy judge, struck a breathtaking blow for justice when he assessed $45 million in punitive damages against Bank of America for violating the automatic-stay provision of the Bankruptcy Code. You may recall that a Texas bankruptcy judge hit Educational Credit Management Corporation with a $74,000 punitive damages award for the same offense.

Here are the opening words of Judge Klein's Bank of America decision:

Frank Kafka lives. This automatic stay violation case reveals that he works at Bank of America. 
The mirage of promised mortgage modification lured [Erick and Renee Sundquist] into a kafkaesque nightmare of stay-violating foreclosure and unlawful detainer, tardy foreclosure rescission kept secret for months, home looted while the debtors were dispossessed, emotional distress, lost income, apparent heart attack, suicide attempt, and post-traumatic stress disorder for all of which Bank of America disclaims responsibility. 

Judge Klein then detailed Bank of America's offenses in detail--his opinion is 107 pages long! And at the end, Judge Klein spelled out how the punitive damages award should be apportioned:

The actual . . . damages are $1,074,581.50. The appropriate . . . punitive damages are $45,000,000.00.
The Sundquists are enjoined to deliver $40,000,000 (minus applicable taxes) to public service entities that are important in education in consumer law and deliver of legal services to consumers: National Consumer Law Center ($10,000,000.00), National Consumer Bankruptcy Rights Center ($10,000,000.00), and the five public law schools of the University of California System ($4,000,000.00).

Of course, Bank of America will appeal Judge Klein's punitive damages award, and who knows how that will go. But regardless of what happens on appeal, Judge Klein has turned a glaring spotlight on Bank of America's outrageous behavior.

And if the damages award is upheld, money will flow to entities that can help distressed debtors fight the predatory tactics of the banks.  That would be a great blessing for American society.

And this brings me to Educational Credit Management Corporation, the predatory student-loan debt collector that violated the automatic stay provision of the Bankruptcy Code more than 30 times by repeatedly garnishing the wages of Kristin Bruner-Halteman, a student-loan debtor who worked for Starbucks.  In a 2016 decision, Judge Harlin DeWayne Hale, a Texas bankruptcy judge, awarded Bruner-Halteman $74,000 in punitive damages for ECMC's misbehavior.

But $74,000 is a pittance for ECMC; it probably has that much cash in loose change that slipped under its couch cushions.  According to a report by the Century Foundation, ECMC has $1 billion in unrestricted assets. That's billion with a B.

So--listen up distressed student-loan debtors. If you file for bankruptcy in  a case opposed by ECMC and ECMC violates the Bankruptcy Code's automatic stay provision as it did in the Bruner-Halteman case, you need to ask for several million dollars in punitive damages. How about $10 million--that's only one percent of ECMC's assets.

References

Bruner-Halteman v. Educational Credit Management Corporation, Case No. 12-324-HDH-13, ADV. No. 14-03041 (Bankr. N.D. Tex. 2016).

Robert Shireman and Tariq Habash. Have Student Loan Guaranty Agencies Lost Their Way? The Century Foundation, September 29, 2016. Accessible at https://tcf.org/content/report/student-loan-guaranty-agencies-lost-way/

Sundquist v. Bank of America,  Adv. Pro. No. 204-0228, Case No. 10-35624-B-13J (Bankr. E.D. Calif. March 23, 2017).




Monday, March 13, 2017

Student Debtors and the Consumer Financial Protection Bureau: Trump needs to strengthen the CFPB, not weaken it

Last January, the Consumer Financial Protection Bureau sued Navient Corporation, a student-loan debt collector, accusing the company of "systematically and illegally failing borrowers at every stage of repayment."

According to CFPB Director Richard Cordray, Navient cheated student borrowers by making it more difficult for them to pay back their college loans. "At every stage of repayment, Navient chose to shortcut and deceive consumers to save on operating costs," Cordray charged. "Too many borrowers paid more for their loans because Navient illegally cheated them , , , "

Specifically, the CFPB accused Navient of these illegal practices:
  • Failing to correctly apply and allocate borrowers' payments to their student-loan accounts. "Navient repeatedly misapplies and misallocates payments--often making the same error multiple times,"  the CFPB alleged. And all too often, Navient would not correct its errors unless a borrower discovered the problem and brought it to Navient's attention.
  • Giving struggling borrowers bad advice about student-loan repayment options.  The CFPB also accused Navient of steering student debtors toward costly forbearance options when they were having trouble making their monthly loan payments. These options give borrowers a break from making their payments, but the interest continues to accrue during forbearance. CFPB believes Navient should have helped borrowers get into income-driven repayment plans (IDRs) that would lower their monthly payments instead of encouraging them to apply for forbearances.
  • "Obscur[ing] information" borrowers needed to remain in income-driven repayment plans. The CFPB also said Navient failed to adequately inform borrowers about what they need to do to maintain their eligibility for income-driven repayment plans. Once borrowers enter those plans, their monthly payments are determined by their annual income; but to remain eligible, borrowers must recertify their income every calendar year. Apparently, a lot of borrowers in IDRs do not know they are required to recertify their income on an annual basis.
As the New York Times said in an editorial, CFPB's charges against Navient "have the ring of truth." Without question, student borrowers who opt to skip loan payments temporarily under  a government-approved forbearance plan see their loan balances grow dramatically due to accruing interest, which accelerates their descent into default. And it seems evident that people in income-driven repayment plans don't understand what they need to do to maintain their eligibility; half the people who enroll in IDRs get kicked out of them for failing to recertify their income on an annual basis.

The student-loan debt collectors are hoping President Trump will dismantle or cripple the CFPB, which would prevent the agency from bringing lawsuits like the one it brought against Navient. And perhaps he will.

But I am hoping the Trump administration  surprises the corporate fat cats and throws its full support behind CFPB's lawsuit against Navient.  Indeed, the CFPB needs to become a lot more aggressive.

In my view, the CFPB should investigate the student loan guaranty agencies that are making a fortune in the student-loan collection business. As the Century Foundation reported last year, four of these agencies have amassed $ 1 billion apiece through servicing and collecting student loans.

Educational Credit Management Corporation, which holds a billion dollars in unrestricted assets, is particularly ruthless. Just last year, a federal bankruptcy judge assessed punitive damages against ECMC for repeatedly violating the automatic stay provision of the Bankruptcy Code by garnishing the wages of a Starbucks employee more than 30 times after she filed for bankruptcy in an effort to collect on a defaulted student loan.

In short, there is a lot for the CFPB to do, and the Navient lawsuit is only a small step in the right direction. It would be a tragedy if the corporate interests defanged the CFPB, which is only now getting serious about protecting student-loan debtors from abuse.

Richard Cordray, CFPB Director
photo credit: Getty Images

References

Bruner-Halteman v. Educational Credit Management Corporation, Case No. 12-324-HDH-13, ADV. No. 14-03041 (Bankr. N.D. Tex. 2016).

Consumer Financial Protection Bureau. CFPB Sues Nation's Largest Student Loan Company Navient for Failing Borrowers at Every Stage of Repayment. Consumer Financial Protection Bureau Press Release, January 18, 2017.

Robert Shireman and Tariq Habash. Have Student Loan Guaranty Agencies Lost Their Way? The Century Foundation, September 29, 2016. Accessible at https://tcf.org/content/report/student-loan-guaranty-agencies-lost-way/

Bob Sullivan. Will a Trump presidency lead to more predatory lending? Market Watch, January 18, 2017.

Unfairly Squeezing Student BorrowersNew York Times, February 4, 2017.