December, 2019
Washington – On December 12th, Secretary Betsy DeVos will testify before the full House Committee on Education and Labor. The subject is "borrower defense" and why she has not complied with the law to cancel the loans of defrauded students. She has continued loan collections, garnished wages, withheld tax refunds, and ruined the credit of borrowers whom she knows owe nothing. The victims number in the tens of thousands.
This puts her in a lawbreaking league above even celebrities caught in Operation Varsity Blues, some of whom went to jail, and international students stung by the ICE's controversial University of Farmington, who were deported. So far Betsy DeVos has been cited for only contempt of court (for which the U.S. Department of Education was fined $100,000, paid by taxpayers, not DeVos).
If other recent hearings on student loans are any guide, however, there will be an attempt by the Secretary and by the Committee's minority to distract from the subject, to scurry down tried and true rabbit holes with claims that
(1) student loan law is too complicated, for which Congress is to blame;
(2) tuition is too high, for which colleges and universities are to blame;
(3) the Democrats caused the problem, with the Affordable Care Act of 2010 that terminated the bank-based FFEL program;
(4) government itself is the problem, so student loans should be turned over to private experts to administer;
(5) greedy borrowers are owed nothing; they signed for the loans and they should repay them;
(6) Federal Student Aid's NextGen system will solve all student loan problems with more iPhone apps;
(7) loan servicers are actually to blame, for not following Department of Education instructions.
I'm not optimistic that the hearing will stay on the subject, given so many such possible diversions for members on both sides of the aisle.
But I'm hoping Committee members will at least ask which servicers have been sanctioned for servicing misdeeds and what kind of discipline was meted out within the Department for administrative failures. The FSA COO, General Mark Brown, made a statement on October 24th that such actions were taken, but there is good reason to believe that servicer sanctions were meaningless and that employee discipline measures were directed at people who were trying to solve the problem, not those who created it.
The other October 24th claims by COO Brown have proved to be wildly inaccurate, unfortunately, so the Committee has all the more reason to ask about the details of any actual servicer reprimands and internal Department personnel actions.
President Trump is reportedly looking for a big student loan move he can announce soon, so as to compete for attention with presidential candidates and others who propose widespread loan cancellation. He is not satisfied with what Betsy DeVos has proposed, whatever that is, according to newspaper reports. His deadline is December 20th.
The following are some administrative actions the President could take, to immediate approbation, by directing his Secretary of Education to:
a. follow the law expeditiously in all cases involving borrower rights, whether borrower defense, total and permanent disability discharges (including veterans), public service loan forgiveness, or other loan cancellation programs. Although some cancellations have been announced, they have not actually happened, most notably disability discharges.
b. drop the "preemption" argument that federal student aid law supersedes state consumer protections and other legal rights, as the preemption doctrine has been shredded by several courts and is transparently hostile to student loan borrowers.
c. begin using discretion on which student loan bankruptcies to oppose, rather than opposing all.
d. close the revolving door between the Department and the student loan industry, by removing or reassigning Department employees with loan industry conflicts of interest.
e. renegotiate servicer contracts, open servicing to new competitors, and debar servicers with bad records.
The President should scrap a new DeVos proposal to move student loans to another entity, out of the Department of Education, which at best is a move to distract from her abysmal record and at worst a possible move to sell off the student loan portfolio to profiteers and eliminate borrower protections.
If the White House wants a bold initiative on student loans, it could propose to emulate other countries' successes with income-based repayments through tax system administration, coupled with adoption of the tools of fiscal federalism* to reduce college and university tuition. That would turn heads and actually be workable, equitable, and affordable.
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* Matching, maintenance-of-effort, and performance requirements were once features of federal higher education efforts, not coincidentally in an era of low tuition.
