November, 2019
Washington – When we last visited the subject of federal student loans a few weeks ago, we had little reason to hope for any breakthroughs that would benefit the nation's many aggrieved and defrauded borrowers. It was as if the whole country had become inured to student loan corruption.
But much has changed since:
• Secretary Betsy DeVos has been held in contempt of federal district court for violating court orders in thousands of "borrower defense" cases. Her legal advisor on student loans and consumer protections, Steven Menashi, was nominated to a federal appeals court seat but that nomination is now in trouble in the Senate, as it should be.
• DeVos's first choice to head office of Federal Student Aid in 2017, A. Wayne Johnson, has resigned abruptly from the Department of Education, calling the federal student loan system "fundamentally broken." He has announced his candidacy, as a Republican, for the Senate based on cancelling most borrowers' loans and providing tax credits to others.
• The National Student Loan Defense Network, led by former Department officials committed to justice for defrauded borrowers, is suing DeVos and the "corrupt Department of Education" for sending millions of student loan dollars to two for-profit schools despite knowing they were unaccredited, then covering it up and collecting from borrowers on the illegal loans. NSLDN has already prevailed in other student loan cases.
• The recently appointed COO of Federal Student Aid, Mark Brown, has released a video promising to do better by borrowers, saying that loan servicers have been reprimanded for improperly collecting on student loans and that certain Department officials have likewise been disciplined.
So what is Congress doing about this? For most intents and purposes, the House has been missing-in-action. Although it has held several hearings among its committees and subcommittees, they have fizzled despite excellent panel testimony from student loan experts and victims. Members got sidetracked by student loan industry arguments that the programs are too complicated to administer, that borrowers themselves are to blame, and that fixes must await new legislation.
I have watched all the hearings. Only once did I ever hear, from a member, the word "wrongdoing," and only once the word "corruption." This, despite overwhelming evidence of just that. Corruption has infected the Department for many years. See earlier posts for examples of perjury, obstruction, and false claims.
The chairman of the House Committee on Education and Labor, Congressman Bobby Scott, has now threatened to subpoena Betsy DeVos if she does not voluntarily appear before the committee to answer questions about the matter for which she was found in contempt of court, and about the distribution of funds to unaccredited colleges.
That is only the tip of the iceberg. The chairman must be ready to confront the Secretary over the corruption that has ruined the Public Service Loan Forgiveness program and determine what kind of meaningful "reprimands" servicers have ever been given for illegal actions in any program. He needs to determine which Department officials have been "disciplined" by Mark Brown, if that is indeed the case as claimed. Are the disciplined officials political appointees or civil servants? Are they being scapegoated?
If the system is so bad, as Wayne Johnson concluded, is it because the Department of Education was long ago captured by the industry it is supposed to regulate? The answer to that is an obvious yes. The Department's key positions for many years have been filled through a revolving door with industry.
Whatever Chairman Scott does, he needs to know that another round of fizzled House hearings will make matters worse. Inconclusive hearings will only encourage more defiant behavior from the DeVos Department, which has proved itself committed to delivering taxpayer funds to voracious appetites in the student loan industry and for-profit colleges, at the expense of taxpayers and borrowers, with disregard for the rule of law.
On the other hand, we can hope that Chairman Scott has now seen what happens when remedies commensurate to the offenses are seriously considered. The mention by a federal judge of possible jail time for DeVos was quickly followed by one high-level resignation and much apologizing from another.
Congress has many remedies at its disposal. It's time to let the DeVos Department know that measures from fines to impeachment may be put into play to see that borrowers and taxpayers get the justice due them.
In other words, Chairman Scott, it's time to rise to the occasion.
