February, 2018
Washington -- Not surprisingly, there is more news about the Iron Triangle that now connects congressional committee staffs, the lobby group CECU, and the U.S. Department of Education. See earlier posts about Iron Triangles here, here, and here.
• Secretary Betsy DeVos has announced yet further weakening of student and taxpayer protections from predatory for-profit colleges. Two of her top advisors, Robert Eitel and Julian Schmoke, have deep roots in that sector.
• The Department of Education has awarded a student loan collection contract to Performant, a corporation with a checkered history but one in which Secretary DeVos has had a financial interest.
• The Department of Education brought back a figure from an earlier Iron Triangle, Kent Talbert, to be acting General Counsel. He formerly worked for Senator Strom Thurmond, then for House and Senate higher education authorizing committees, then as General Counsel for the Department of Education during the years it paid illegal claims to student loan lenders, 2002-2006. Thereafter, he was in legal practice with Robert Eitel in the Talbert & Eitel law firm.
• Sensing an imperfection in the Iron Triangle, Secretary DeVos has removed A. Wayne Johnson from COO at Federal Student Aid after only a few months on the job. He is being replaced by James Manning, known for being a good soldier, and Kathleen Smith, a proven veteran of Iron Triangles from her days in the interest groups, on the Hill, and twice in the Department.
Likely there is recusal paperwork on file in the Department to show that Eitel and Schmoke did not make or participate in the decision to aid for-profit colleges; Secretary DeVos surely has divested from Performant; and others with conflicts of interest likely do not have to report them as arguably they are former, not current.
Two observations: First, there is a history at the Department of Education of abuse of recusals and conflicts of interest. See the earlier post on Eugene Hickok and Matteo Fontana. Second, is Talbert not supposed to know what Eitel wants, even if Eitel is recused? Does FSA not know Performant was financed by DeVos? Of course they know, and perhaps have acted accordingly. I recall asking FSA why it was paying illegal claims to lenders in 2003. The answer was "That's what Bill Hansen wants." Bill Hansen, former lobbyist* for the lenders but then Deputy Secretary, was recused from the decision, but FSA knew his mind. The mess has never been cleaned up, although lenders got their comeuppance when Congress, fed up with corruption, false claims, bribery of college financial aid officers, and gifts of stock to Department officials, simply killed the bank-based lender program, FFEL, in 2010.
That may be the only way to deal with the current Iron Triangle: disestablish FSA. Those who follow comparative government know how other countries handle student aid more efficiently and without hurting the lives and prospects of students and their families.
There is another route that keeps coming up in lawsuits by borrowers: RICO – federal and state laws against racketeering. Iron Triangles are colloquially rackets, no doubt, but the question is are they illegal? Do acts at the Department of Education, and actions the Department permits through its contractors, constitute violations of federal or state RICO laws? Perhaps we shall soon know more, if any of these lawsuits survive.
____________________________
*Hansen was head of the Education Finance Council and was succeeded there by Kathleen Smith not long thereafter. He is now on the board of Performant, which not only got a huge loan collection contract last month from the Department of Education but also benefited by advance trading in its stock before the announcement of the award, thanks to the way FSA handled the release of the information.
