Time for the Big Fix in U.S. Higher Education

August, 2023

Washington — Now is a propitious time to fix much of what's wrong in U.S. higher education pricing, admissions, and financial aid.  Three recent developments make such action more plausible than previously, and a looming student loan repayment crisis makes it a necessity.  

Affirmation action based on race is out, per the U.S. Supreme Court.  Legacy admissions are perhaps the next preferences to fall, partly in response to the affirmative action decision.  And then there is Henry et al. v. Brown, a lawsuit striking at the way institutions surreptitiously manipulate enrollment management to favor the wealthy over the financially needy, which has contributed to the debilitating student loan crisis.  This case is not going away until there are many large settlements in favor of borrowers.  All eyes are on the Secretary of Education to see what he will do in response to these three developments. 

Now, as to the necessity of a sweeping fix, consider the following.  

All this is happening at a time when millions of student and parent borrowers are going back into loan repayment in October, after the Covid pandemic pause gave them three years of temporary relief.  The Biden administration is trying to effect a smooth transition to repayment but is hampered by a lack of resources from Congress to do the job.  The administration's earlier attempt to cancel up to $20,000 of debt for borrowers with annual incomes under $125,000, which would have cut the number of accounts to service by nearly half, was blocked in June by the Supreme Court.  

The Biden cancellation plan was not only blocked by the Supreme Court, it was also unpopular with many because it did not address the underlying causes of the huge debt build-up, which would be all too likely to repeat themselves quickly.  This viewpoint was widely distributed across the political spectrum, but the lack of attention to the future has been pounced upon by congressional Republicans especially, who continue to hold up funding to provide servicers what they need to get people back into repayment accurately and efficiently.  (This is ironic in that most servicers are located in red states, and are being impaired by their own congressional delegations.)

So what should the Secretary do?  There is a ready solution to address all of the above:  begin to enforce laws already on the books. 

The Secretary should send department program review teams to selected institutions with instructions to review whether their pricing, admissions, and financial aid processes are complementing or conflicting with the statutory purposes of federal student financial aid programs under the Higher Education Act. If they are complementing federal programs, they are not in trouble.  But if institutions are undermining federal programs by favoring the wealthy, in such a way that it results in higher debt for the financially needy, whether by legacy admissions or secretive algorithms, their future participation in HEA Title IV should be reviewed.*  Transparency in financial aid, and therefore in setting net price, is required by federal law.**  Serious misrepresentations by institutions in matters of admissions and financial aid are punishable under law by limitation, suspension, or termination from federal programs.***  

This reform action by the Secretary is urgently needed to convince skeptics that immediate help for servicers and borrowers (many of whom are the victims of unfair institutional practices) will not lead to even greater borrowing in the future.  Putting institutions on notice that they can and will lose their eligibility for federal student aid if they try to game the system, against the purposes of the HEA, will change institutional behavior.**** Reducing bias toward the wealthy (as well-documented by Raj Chetty and others) will also redound to the benefit of the lower income and its disproportionately large minority component.  This will counterbalance the loss of race-based affirmative action, which over the past three decades unfortunately acquired its own bias toward wealth. 

Such action by the Secretary is also necessary to restore the faith of Americans in the promise of higher education, which badly needs it.


* Legacy admissions are often dwarfed by wealth biased algorithms. Chetty et al. estimate them at 46% of bias toward wealth in their sample. Doing away with the former may only be cosmetic if it leads to increased reliance on the latter.

** 34 CFR § 668.42 Financial assistance information   

*** 34 CFR § 668.71 Scope and special definitions

**** Many institutions would welcome relief from the destructive merit-based aid arms race.  


DOJ and the Student Loan Crisis

August, 2023

Washington — How much of the nation's student loan crisis can be attributed to the Department of Justice?   It's a question that deserves more exploration than it has received.

There are at least four instances in the past few decades when DOJ made highly questionable calls that exacerbated the crisis.  

1.  In the early 1990s, a group of colleges known as the Overlap Group agreed to limit the amount of grants they were giving to non-needy students, to be able to target the financially needy instead.  DOJ stepped in to say it would be a violation of the Sherman Antitrust Act for the colleges not to compete against each other with grants for the non-needy.  A federal appeals court ruled for the colleges, but DOJ did not change its position.  Congress then carved out a narrow exemption for such colleges, but again DOJ held fast in its interpretation.  This helped set the stage for a merit-based arms race among many colleges that not only remains to this day but has spread widely, short-changing need-based aid that could have been deployed to the financially needy to reduce student loan borrowing.  It has also led to tuition hikes and the practice of discounting to give the illusion of aid.  

2.  In the early 2000s, several student loan lenders began making false claims against the Department of Education.  After Inspector General's audits, Secretary of Education Margaret Spellings ended paying the false claims but did not require the lenders to pay back any ill-gotten gains.  In subsequent litigation over the false claims, DOJ did not intervene against the lenders, despite remarkably detailed discovery evidence documenting the illegal schemes. (If this didn't result in DOJ's intervention, what would?) This sent a signal to the student loan industry that action against it from DOJ under the Higher Education Act was unlikely.  Bending or breaking rules might eventually have to be stopped, but there would be no consequences, even requirements to reimburse.  This set the stage for widespread loan servicer dysfunction in the subsequent decade, adding billions of dollars of debt onto student and parent borrowers.  Secretary Miguel Cardona recently announced the cancellation of $39 billion of such debt, which appears to be only a first installment.

3.  In 2016, another small group of colleges held discussions to try once again to limit college aid to the non-needy, which might have led to reform of legacy admissions as well.  (Legacy admissions are sometimes explained as a way for colleges to raise funds, but those funds are often returned back as aid to non-needy students.)  According to a chapter in a soon-to-be-published book about "enrollment management," when DOJ learned of these discussions, it demanded that the colleges preserve any records as possible evidence of violations of the Sherman Act.  This gave the enrollment management industry (historically associated with lenders) the green light to roar ahead on making so-called merit aid even more of a priority over need-based aid at many colleges.  The financially needy would have to rely on ever greater student loan debt.  

4.  In 2023, DOJ's solicitor general appeared before the Supreme Court on behalf of President Biden's student loan cancellation effort under the HEROES Act.  A key question in oral argument was whether the State of Missouri, out of its relationship with the Missouri-based student loan servicer MOHELA, had standing as a plaintiff.  Elizabeth Prelogar argued for DOJ that Missouri did not have standing, but inexplicably (a huge surprise to me), said MOHELA would have standing if it had been a plaintiff.  This gave the Supreme Court majority an opportunity to make a much shorter leap to give Missouri standing, if DOJ was conceding that MOHELA had it.  

I thought at the time (and still do) that this was a huge gaffe tactically and an abrupt reversal of DOJ policy.  In 2016, the loan servicer PHEAA asked the Supreme Court to take up, on certiorari, a 4th Circuit decision that PHEAA was not an arm of Pennsylvania.  The Court asked the solicitor general to advise it of the position of the United States on the question.  In the summer of 2016, in the DOJ solicitor general's office, both PHEAA counsel and counsel for two plaintiffs against PHEAA gave presentations.  (I was present for the plaintiffs.) In a written response to the Supreme Court's request shortly thereafter, the solicitor general counseled the Supreme Court to deny certiorari to PHEAA, on grounds that it was not an arm of Pennsylvania, which the Court then did in January, 2017.* 

The relationship of PHEAA to Pennsylvania is substantially the same as MOHELA to Missouri.  What made Elizabeth Prelogar suddenly argue that MOHELA would have had standing?  The Supreme Court had denied PHEAA certiorari on essentially the same question.  Why didn't DOJ raise this?  Neither Missouri nor MOHELA had standing until DOJ gave MOHELA away in oral argument.  It was then inevitable for Chief Justice John Roberts to exploit it in his written decision.  

It can be argued that the Supreme Court majority was bent on making the student loan case another notch in its belt supporting a "major questions doctrine," regardless of roadblocks in its way, but why was DOJ such a willing party to it on the question of standing?** On such points is the course of history determined.  

It is another example of how DOJ has made dubious decisions on student loan matters for decades, which have disadvantaged borrowers and have actually undermined the federal government's own programs to help the financially needy.  DOJ actions have driven up borrowing and its inactions have contributed to a broken student loan servicing system.  Its gaffe hangs over future attempts to provide student debt relief.  

What will done about it?  DOJ has recently shown signs that it is beginning to understand how it has been hurting the financially needy, and how some colleges have tried to use their (now-expired) statutory exemption from the Sherman Act to collude in favor of merit-heavy enrollment management schemes.  Is DOJ's decision to file a statement of interest with the court in the Henry case a long-overdue reversal?  Probably not.  DOJ still has a long way to go.***   


*See Dan E. Moldea, Money, Politics, and Corruption in U.S. Higher Education (2020), pp. 125-126.

**DOJ and the Solicitor General were more impressive in defending the use of the HEROES Act as the basis for student loan relief, although many experts believe the HEA would have been a better choice.  Unfortunately, DOJ also disadvantaged itself on the matter of the relief apparently being so costly that it triggered a "major question" in the view of some on the Court.  The relief could and should have been scored at a "minor question" level by subtracting debt cancellation already (April, 2022) announced and owed borrowers as a result of servicer dysfunction, as well as subtracting uncollectible amounts already subject to the Federal Claims Collection Standards (FCCS), 31 C.F.R. Subt. B, Ch. IX, which is under DOJ and Treasury jurisdiction.  The numbers presented to the Court were double- and triple-counting, and should have been unduplicated.  Had they been, the sharpest written exchange among justices in modern Court history, which has shaken the Court's standing in the eyes of the public, could have been avoided.

***From the DOJ statement of interest: "The United States offers no view on Plaintiffs’ antitrust standing, their factual claims, the proper definition of “need-blind,” the application of any applicable statute of limitations, or the separate motions to dismiss...."  In other words, in its statement DOJ offered the court a way out of the case without ever looking at how exactly financially needy students were being forced into higher levels of debt, despite the plaintiffs' detailed descriptions of enrollment management schemes that were illegal if for no other reason than they were secretive and not disclosed as required by the Higher Education Act (see citations below).  Rather than dealing these schemes a coup de gras, DOJ is choosing to soft-pedal them. 

34 CFR § 668.42 Financial assistance information.


(1) Information on financial assistance that the institution must publish and make readily available to current and prospective students under this subpart includes, but is not limited to, a description of all the Federal, State, local, private and institutional student financial assistance programs available to students who enroll at that institution.

(2) These programs include both need-based and non-need-based programs.

(3) The institution may describe its own financial assistance programs by listing them in general categories.

(4) The institution must describe the terms and conditions of the loans students receive under the Federal Family Education Loan Program, the William D. Ford Federal Direct Student Loan Program, and the Federal Perkins Loan Program.

(b) For each program referred to in paragraph (a) of this section, the information provided by the institution must describe -

(1) The procedures and forms by which students apply for assistance;

(2) The student eligibility requirements;

(3) The criteria for selecting recipients from the group of eligible applicants; and

(4) The criteria for determining the amount of a student's award. 
[Emphasis added]    

34 CFR § 668.71 Scope and special definitions.

(a) If the Secretary determines that an eligible institution has engaged in substantial misrepresentation, the Secretary may -

(1) Revoke the eligible institution's program participation agreement, if the institution is provisionally certified under § 668.13(c);

(2) Impose limitations on the institution's participation in the title IV, HEA programs, if the institution is provisionally certified under § 668.13(c) ;

(3) Deny participation applications made on behalf of the institution; or

(4) Initiate a proceeding against the eligible institution under subpart G of this part.

Will Merlin Hear these Birds in the Future?

August, 2023

Lincoln — The bird identification app Merlin heard the following birds during the early mornings of July 23-29 on the north half of our tallgrass prairie and riparian woods at 5840 West Superior.  

The property is in the process of receiving a conservation easement, but two neighboring properties to the north and east, currently grasslands, may soon be developed.  If that happens, how many of these species will disappear?  Likely a majority of them.  

July 23. Red-eyed Vireo, Downy Woodpecker, Northern Cardinal, American Goldfinch, Black-capped Chickadee, Field Sparrow, American Crow, House Wren, Red-headed Woodpecker, American Robin, Song Sparrow, Cedar Waxwing, Blue Jay

24. (additional) Vesper Sparrow, Upland Sandpiper, Eastern Kingbird, White-breasted Nuthatch, Common Yellowthroat, Baltimore Oriole, Rose-breasted Grosbeak, Eastern Wood-Pewee, Red-bellied Woodpecker, Gray Catbird, Grasshopper Sparrow, House Finch, Red-tailed Hawk 

25. (additional) Cooper's Hawk, Great-tailed Grackle, Eastern Meadowlark

26. (additional) Dickcissel

27. (additional) Yellow-throated Vireo

28. (additional) Great-crested Flycatcher, Brown Thrasher

29. (additional) Killdeer

Total July 23-29: 34 species

Unexpectedly absent from the Merlin list (heard or seen at other times):  Great Horned Owl, Barred Owl, Yellow-billed Cuckoo, Northern Bobwhite, Yellow-shafted Flicker, Red-winged Blackbird, Tree Swallow, Barn Swallow, Eastern Bluebird, Orchard Oriole. 

And what about butterflies and other pollinators?  Monarchs were spotted frequently during the last week of July, especially on Whorled milkweed, Common milkweed, and Butterfly milkweed.  Wachiska Audubon reports in its August newsletter that the 17-acre aforementioned grassland to the east, owned by the City, "was hayed a few weeks ago, and by the end of July the native grasses and forbs had really taken off.  There were dozens of common milkweed plants that were over two feet tall after the haying and some timely rains...."  Wachiska deserves credit for clearing invasives from this parcel to give grassland birds and pollinators a chance.  

Speak for Yourself, David Brooks

August, 2023

Washington — David Brooks made a splash with his column "What if We're the Bad Guys Here?"

We can condemn the Trumpian populists until the cows come home, but the real question is: When will we stop behaving in ways that make Trumpism inevitable?

Speak for yourself, David Brooks. Just when will you stop? You're long overdue.

Some of us have been trying to behave responsibly, reaching out to the Trumpian populists to address their real needs, to demonstrate to them that democracy works, that they do not need to follow a dangerous authoritarian to get their voices heard and their needs addressed.

I've spent years working on the Farm Bill (which should be called the Food Bill), trying to get elected officials on both sides of aisle to make the bill a vehicle to address crises in rural (and culturally rural) areas, such as the lack of healthy food, the faltering health care system, and the deaths of despair caused by obesity and opioids. One solution would be to bring back the Extension Service to address nutrition and wellness. Do you know what the Extension Service is, why it is trusted when other institutions are not, and why channeling help through it could make a big difference in political as well as physical health? Do you and your fellow Bad Guys (the so-called elites) ever think in these terms? Not in my experience.

I've spent even more years trying to stop the nation's student loan system from widening class and race inequalities.  With rare exception, I have not noticed you and your fellow Bad Guys engaged in this effort. Now higher education is widely distrusted, especially by the Trumpian populists, which portends ill for the nation on many levels — political, economic, and social.

So, yes, stop behaving so counterproductively, so stupidly, if I may say it that way.  For good advice, seek out people who have the highest Bad Guy credentials but have overcome them.  We're out there. Will you pitch in?


Is It Racketeering?

August, 2023

Washington — A few years ago, a Philadelphia newspaper reporter called me to validate, if possible, what he thought was an outrageous statement from a board member of the federal student loan servicer PHEAA.  The board member had told him that PHEAA did not cancel federal student loans even if borrowers qualified by law, because holding onto the loans was how PHEAA made money, not by canceling them.

I told him it was all too true and he had an obligation to report it publicly for the sake of the integrity of the federal student loan program.  Not to mention how PHEAA was adding to ever-higher debts for many who will never be able to pay them off.   

The call came around the same time a PHEAA employee asked me for advice on how to fight his dismissal for objecting to how PHEAA was misleading borrowers through its call-center operations.

It was not long until the attorneys general of Massachusetts and New York both sued PHEAA on behalf of their states' borrowers.  

The U.S. Department of Education, however, took the side of PHEAA.  In a March, 2018, notice from Secretary Betsy DeVos, the Department claimed that neither states nor borrowers could bring actions against PHEAA because of "federal preemption" under the Higher Education Act.  (Talk about federal overreach!) The Department also ended its cooperation with another federal agency, the Consumer Financial Protection Bureau, with regard to student loan borrower complaints.  The Department of Justice even attempted to intervene against the Massachusetts lawsuit. 

These actions were led and coordinated by former PHEAA employees who rotated through the Department of Education.

Fast forward to 2023.  Several state and federal judges have knocked down the "preemption" attempt to bilk borrowers and the Department of Education has, appropriately, begun to make remediations to those victimized. 

In the Federal Register of July 24, 2023, Secretary Miguel Cardona finally reversed the bizarre attempt to protect servicers from borrowers, and from states acting on behalf of borrowers.  He announced the return to "cooperative federalism," the foundation of the Higher Education Act of 1965.  This follows his action earlier in the month to cancel $39 billion of student debt that was the result of improper servicer actions.

An experienced attorney with considerable federal experience is now asking, in part on behalf of family members who have been borrower victims, if PHEAA's willful behavior is an example of illegal conduct under the Racketeer Influenced and Corrupt Organizations act (RICO).   It certainly seems to be.  If this isn't racketeering, it's hard to imagine what would be.   

PHEAA is no longer a federal loan servicer; much of its portfolio has been transferred to MOHELA, a servicer with its own set of credibility problems.  But that does not mean a RICO lawsuit against PHEAA could not be brought.  

Moreover, at what point should colleges have been obligated to warn potential borrowers of the risks involved in taking out student loans, that servicers could and would undermine the terms and conditions of the loans, and that consumer protections would be erased in the process?  Would the FTC and SEC permit the marketing of such products in other sectors of the economy?  Surely not.    

I regret that I was never able to help the PHEAA employee who was fired.

To my knowledge, the Philadelphia newspaper reporter never made public what the PHEAA board member told him.  Had he done so, perhaps that $39 billion — and counting — figure would have been much lower.