Education Secretary Betsy DeVos’s plan to remove the only independent watchdog that keeps private loan servicers handling the nation’s more than $1.4 trillion in student loans held by about 42 million borrowers from using deceptive practices and fraudulent means to rip off students and former student has run into a buzzsaw of opposition from 39 Democratic members of Congress.
DeVos is ending a practice instituted under President Obama by which the Department of Education shares loan information with the Consumer Financial Protection Bureau (CFPB), that is used to keep private, for-profit loan servicers from tricking and cheating the loan holders.
“We are deeply concerned this backward step will allow student loan servicers to more easily take advantage of borrows,” wrote the Congress members who include Senator Sherrod Brown, Senator Patty Murray, Rep. Maxine Waters and Rep. Bobby Scott.
“Students and borrowers cannot afford to see these protections rolled back,” continues the letter. “Cooperation between the Department and CFPB is in the best interests of students, borrowers, and taxpayers, and the Department’s decision to abandon this partnership is contrary to its stated mission to ‘east the burden of borrowers.'”
The government pays the money in a student loan directly to the borrower but then farms out the job of overseeing the loans, collecting on them and handling loan defaults.
Under President Obama, significant effort was spent by a task force to look at an industry known to be ripe with abuses, and institute much-needed reforms. One of those was to have the CFPB actually police the loan practices, which the government doesn’t do.
DeVos, who is building a record for siding with private, for-profit colleges, loan servicers and others over the interest of students and families, argues that she has put in place people inside the Department who can handle any complaints or problems.
The joke is that everyone she has hired comes straight out of the industry it is being asked to police. For instance, in June, DeVos appointed Wayne A. Johnson as the head of the Office of Federal Student Aid.
In a press release announcing the appointment, the Department did not bother to mention that Johnson was at that time CEO of Reunion Financial Services Corporation, a private student loan company. That only came out in an article by BuzzFeed.
There is significant reason for concern. The CFPB studied thousands of complaints from March 2016 through February 2017 and reported recently that many “borrowers attempting to invoke their rights under federal law…point to a range of student loan industry practices that delay, defer or deny access to critical consumer protections
The range of abuses and deception goes beyond that.
“These private servicers are bad at their job,” reports The Nation. “They have faced hundreds of millions of dollars in fines for pushing borrowers into costlier repayment plans, hiding information about cheaper options, overcharging active-duty military and harassing borrowers after co-signers die, to name just a few examples.”
The government does nothing about any of this, but the CFPB joined with several state attorney generals to sue Navient, one of the larger student loan servicers, for “failing borrowers at every stage of repayment,” and “cheating hundreds of thousands of student loan debtors.”
In a response to the lawsuit, Navient denied guilt but adds that “there is no expectation that the servicers will act in the interest of the consumer.”
The situation since DeVos took over is especially troublesome for millions of students who took loans as part of the Public Service Loan Forgiveness program. This promises to cancel student loans if that person takes a job in government ora non-profit for at least ten years.
The first group of borrowers was supposed to start their loan forgiveness this fall but under DeVos there have been “servicing breakdowns” that interfere with loan forgiveness and are stopping many people from enrolling in the program.
“Now, right as it’s the government turn to pay up, they’re beginning to indicate that maybe they’ve changed their minds,” reports GQ.com. “This kind of bait and switch is unconscionable.”
“Betsy DeVos and the Department of Education can’t take Donald Trump’s lead on everything,” continues GQ; “it’s bullshit when he refuses to pay people who build his buildings, and it’s bullshit when we refuse to pay people who decided to take lower paying jobs in order to help the country.”
These are only some of the many reasons to be upset, even frightened, by what DeVos has done since she was confirmed by the Senate no a narrow partisan vote.
She has scrapped plans for a website which would have helped borrowers pay, get the best loan terms and get information on their loan when there are problems.
She tried to limit loan servicing to a single company compared to more than 300 in the field at present. That brought so much criticism she was forced to back off on the idea.
She has shown sympathy to for-profit colleges, which came under severe scrutiny during the Obama administration for charging huge tuition amounts for programs which did not provide the education or job future that was promised.
Under DeVos, the office’s fraud enforcement unit is now run by Julian Schmoke, former dean of the for-profit DeVry University, which has been fined multiple times by state and federal regulators for misleading students through deception marketing and by using false statistics to sell its service.
Under DeVos, rules to shut down deceptive programs at for-profit colleges have been put on hold and scuttled rules which ensure students who are victims of fraud don’t have to repay their loans.
At the same time under DeVos, the Department no longer accepts applications for relief from students who have been defrauded by for-profit colleges and put on hold current applications from more than 65,000 former students. At the end of August, the Department’s lawyers told a court that it will need at least another six months to determine the fate of thousands of students who were tricked into paying for meaningless degrees.
“Lobbyists for the industry, including Newt Gingrich, have gotten nearly everything on their wish list since DeVos entered power,” writes The Nation.
The big fear when DeVos was appointed was that she would favor charter schools and dismantle the public school system. It turns out that isn’t as easy as she expected. It will require an act of Congress, which so far she has not been able to get passed.
Instead, DeVos has had a huge negative effect on other programs, such as the student loan system and the oversight of corrupt for-profit colleges.
She is a disaster that will leave a trail of destruction and pain that will outlast her tenure and hurt students and hard-working people who wanted to use education to improve their position in life for many years to come.
DeVos is a classic example of Trump appointing a rich friend and generous campaign donor who has none of the required experience for the position, but a deep desire to help her rich friends and to dismantle the public education system that has severed so many Americans so well for many generations.