June 11, 2019
Since last fall, the Revolving Door Project has been working to ensure that House Democrats use their newfound majority to perform long overdue oversight that targets the intersection between outsized corporate influence and Trump-era corruption. We have argued that across the breadth of every issue area imaginable, such oversight not only represents good policy but also good politics. In a moment of deep skepticism about the integrity of elites and institutions across the globe, fighting against corruption could not be more timely.
Despite our pleas, few Democrats have embraced this manner of populist oversight. This timidity is disheartening in all cases, but in certain areas, like Betsy Devos’ Education Department, it appears particularly egregious.
While Devos has assaulted the integrity of education from grade school up through college, her assault on protections for postsecondary students stands out as particularly vigorous and harmful because of the greater role the Department plays in higher education. Democrats must meet these attacks with equal fervor, not just because it is the right thing to do, but because it makes good political sense. After all, interaction with institutions of higher education represent a shared experience across a wide spectrum of the electorate. Voters who have spent some time in college make up a growing share of the American electorate, rising from 54 percent in 1997 to 66 percent in 2018. Unfortunately this means that many (44 million people to be exact) share the experience of languishing under the burden of student debt. Betsy DeVos and her cronies are pushing policies that could, and in some cases already are, making these people’s lives harder. Democrats have an opportunity to be viewed fighting on behalf of these millions of students and borrowers.
Yet, Rep. Bobby Scott, chair of the Education and Labor Committee, has largely failed to confront the Education Department’s attacks on students and borrowers. While his committee has held one hearing with Secretary DeVos (to discuss the administration’s 2020 education budget), it has held no hearings with other education department officials or the abusive industry actors who they have empowered.
Here we offer a few suggestions for witnesses whom the Education and Labor Committee should call forthwith.
Student Loan Servicing Industry Infiltration:
As if endless student loan payments for years on end are not bad enough, the system for collecting those loans is wrought with abuse. Despite the federal government serving as the sole originator of federal student loans, collecting federal student loan debt has been left in private hands. Unsurprisingly, those third-party companies often fail to provide the accurate information student loan borrowers need to make the best choices to manage their debt burden. Indeed, two of the three largest student loan servicers (who together service over 90 percent of outstanding federal student loan dollars) are for-profit corporations for whom providing inaccurate information is profitable.
Making matters worse, the federal government has systematically failed to protect borrowers from such abuse. In a scathing report released earlier this year, the Education Department’s Inspector General detailed how the Office of Federal Student Aid (FSA) failed to properly document servicers’ failures, identify broad patterns of abuse, or meaningfully respond with the tools at their disposal, like reducing the number of loans assigned to noncompliant servicers. Several servicers were found to be providing inaccurate or inadequate information up to nearly eleven percent of the time.
Given FSA’s failures, it is unsurprising that many states have chosen to take the fates of their borrowers into their own hands. States attorney general (in addition to public advocacy groups) have sued servicers on aggrieved borrowers’ behalf while state legislators have passed laws that bring student loan servicers under the jurisdiction of states’ financial services regulators. Student loan servicers have responded by suing, claiming that only the federal government has the right to regulate them.
Amazingly, the Department of Education is seeking to preempt states’ efforts. Their main justification? FSA has oversight under control.
All of this begins to make sense when you take a look at the officials in the department’s top roles.
Manning served as Chief of Staff to former Deputy Education Secretary William Hansen and as an Acting Assistant Secretary during President George W. Bush’s administration before burrowing into a civil service job at the Office of Federal Student Aid (FSA). He left that position to work as a consultant to Hansen’s USA Funds. DeVos then brought Manning back as Acting Undersecretary and Chief Operating Officer of FSA.
Some commentators applauded Manning’s appointment, highlighting that he was a rare career professional among a sea of underqualified Trump appointees. As it turns out, this has made little difference; Manning has been neither competent nor an ally to student borrowers in his time in the Federal Student Aid office. He reportedly halted the approval process for defrauded students who were applying for debt relief for almost a year, allowing applications to pile up and borrowers to suffer. As the COO of FSA, Manning also is implicated in the Department’s decision to preempt state litigation that was seeking to hold the student loan servicing industry accountable.
Smith has revolved between government and the student loan servicing industry. Her time in industry has included positions with a variety of former private student loan providers, servicers, and trade organizations that lobby the federal government on these entities’ behalf. In recent years, these groups, like the National Council of Higher Education Resources (NCHER) and the Education Finance Council (EFC), have focused their efforts on stopping state authorities from regulating the loan servicing industry.
Smith joined the Education Department in 2017 as an Acting Assistant Secretary in the Office of Postsecondary Education. Then, in early 2018, Smith became the Deputy COO of FSA and was tasked with overseeing an industry in which she had worked extensively.
Although she now worked for the federal government, Smith’s actions suggested no commitment to the public interest. Instead, her every move betrayed an unwavering commitment to advancing the student loan servicing industry’s interests. Smith first helped end the Department’s information-sharing agreement with the Consumer Financial Protection Bureau (CFPB), a program intended to improve both agencies’ abilities to regulate the industry.
The following year, Smith would help to hand the industry another victory, granting a direct request from a powerful industry trade group. In 2017, NCHER’s President, James Bergeron asked Smith to release regulatory guidance to preempt state actions on behalf of borrowers. Smith had previously worked for the Pennsylvania Higher Education Access Agency (PHEAA), an NCHER member and funder. In March of 2018, the Department released a notice to that effect.
Having aided the industry from the inside, Smith soon dispensed with her government job in favor of a high-powered (and in all likelihood, very lucrative) position at PHEAA – an agency that happens to control a student loan servicer with an especially terrible track record for poor services and abuse.
For-Profit College Takeover:
The pain that bad student loan servicers cause is widespread and can range from the inconvenient to the financially disastrous. In contrast, the for-profit college industry’s effects are acute and often catastrophic.
The for-profit college industry claims to bring private sector expertise to bear in order to provide flexible, often career-oriented education well-suited to nontraditional college students. In reality, however, it has functioned above all to milk students and the federal government, which provides the vast bulk of the funds going to these corporations, for as much money as possible.. Their incentive is not to focus on the difficult work of providing a useful education, but rather marketing that gets students in the door by whatever means necessary, including lies and false promises.
This model depends on a lack of government scrutiny despite relying on federal student aid dollars brought along by low income students. That’s why this industry is threatened existentially by the federal government demanding schools meet higher standards to continue to receive federal aid. During his second term in office, the Obama administration drastically ratcheted up scrutiny on these predatory colleges. Since President Trump took office, however, the Education Department has rolled back new standards and protections with the help of former for-profit lobbyists.
Diane Auer Jones:
Unlike the many Trump administration officials who do not even try to hide their comical lack of qualification for senior political roles, Diane Auer Jones, the Principal Deputy Under Secretary (delegated to perform the duties of the Under Secretary and Assistant Secretary for Postsecondary Education) has sought the mantle of legitimacy. She points to her many years spent working in education policy, including in Congress, the White House, and the Education Department, her writings on the need for more technical postsecondary education programs, and her title as an Urban Institute Fellow.
Under this veneer of credibility, however, is a much uglier truth. Following what appears to have been an uneventful stint as Assistant Secretary for Postsecondary Education at the Education Department in the twilight of the Bush Jr. administration, Auer Jones spun out of government and into the private sector. It was not long before she was scooped up by the sector’s worst actors and those most in need of a former administrator’s skills to help them escape the government’s clutches: for-profit colleges. In the space of 7 years, Auer Jones lobbied for one egregious actor (Career Education Corporation), consulted for others (the industry trade group, Career Education Colleges and Universities) and even served as an expert witness for one chain (CollegeAmerica), happily providing questionable testimony about the benefits of for-profit colleges.
Conveniently hiding her activities behind a consulting firm and the title of Senior Fellow at the Urban Institute, Auer Jones sought to polish her record before heading back into government service. She served for a short while as a policy advisor to the Secretary of Labor before coming full circle to her old position as acting Assistant Secretary for Postsecondary Education, with the added bonus of simultaneously filling the role just above it, Undersecretary.
Auer Jones has not let her seemingly insurmountable web of conflicts of interest get in her way, choosing instead simply not to recuse. As a result, she has been directly involved in countless decisions that are relevant, even existential questions, for her previous employers. She has consistently sided with for-profit colleges and unaccountable accreditors over students.
For example, in September 2018, Auer Jones decided to reverse the Education Department’s 2016 decision to strip college accreditor, Accrediting Council for Independent Colleges and Schools (ACICS) of its federal recognition. College accreditors assess a school’s facilities, programs, admissions practices, and more, verifying that they are in compliance with federal higher education standards and therefore indicating to the federal government, and to potential students, that the education they provide is worth the outlay of substantial student loans.
ACICS had accredited colleges like Corinthian and ITT Tech, the collapse of which left thousands of students without degrees and suffering under the burden of student loan debt. It also accredited several of Career Education Corporation’s (CEC) (Auer Jones’ former employer) colleges
In making her decision, Auer Jones did not consult with departmental staff. Her conclusion that ACICS was only out of compliance with two federal regulations directly contradicted a separate staff analysis which found ACICS to be in violation of almost 60 regulations.
Auer Jones has also helped eliminate rules that were supposed to guard against future implosions like those of Corinthian Colleges. Among these was the gainful employment rule, which required vocational programs at for-profit colleges to “meet minimum thresholds with respect to the debt-to-income rates of their graduates.” In other words, to maintain access to federal aid dollars, schools needed to prove students would demonstrably benefit from going into debt in order to attend them. Many for-profit colleges, including CEC, would have failed under the proposed standard. As a lobbyist for CEC, Auer Jones had worked to stop the rule. Despite this obvious conflict of interest, however, Auer Jones did not recuse herself from the Department’s process for eliminating the standard.
In this year’s rulemaking session she continues to target basic protections for postsecondary students by eliminating credit hour standards and restrictions on distance education programs. Advocates fear that each of these moves would make it easier for-profit colleges to access federal aid dollars while further degrading the quality of education they feel compelled to offer.
Subpoena of Manning, Smith, and Auer Jones, not to mention the industry actors with whom they are closely associated, could lead to electric hearings. Such antagonistic hearings would reveal how corporate predators and the Trump Administration are inextricably and infuriatingly intertwined. Voters care about student debt issues — few issues are more quintessentially non-partisan or are discussed at kitchen tables among a more diverse set of voters. Smith, Manning, and Auer Jones are among the many who personify the ties between Trump and DeVos’ team and genuine corporate villains.