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Judge Blasts Betsy Devos For Violating Order On Fraudulent Student Loans

fraudulent student loans and U.S. Secretary of Education Betsy DeVos
U.S. Secretary of Education Betsy DeVos speaking at the 2017 Conservative Political Action Conference (CPAC) in National Harbor, Maryland. (Photo: Gage Skidmore)

Betsy Devos and the Department of Education have continued to attempt to collect on fraudulent student loans from a now-bankrupt for-profit college.

Federal judge Sallie Kim slammed Education Secretary Betsy Devos on Monday for violating her order to stop collecting student loans from for-profit university empire Corinthian Colleges, a vast education network that went bankrupt in 2015 amidst multiple investigations revealing an array of fraudulent student loans and the predatory nature of its business model.

The episode represents one of the most strident condemnations of Devos’ management of the Education Department to date, with the Magistrate Judge going so far as to say, “I’m not sending anyone to jail yet, but it’s good to know I have that ability.”

“Whether it’s contempt or whether it’s sanctions, I’m going to entertain them,” said Judge Kim, saying she felt “deeply disturbed” by the Department’s “lack of compliance with the injunction … and the sheer scale of violations.”

Trump Administration Reverses Obama Stance on Fraudulent Student Loans

After Corinthian Colleges’ abuses were revealed in 2015, the Obama Administration began installing new rules on loan forgiveness for hundreds of thousands of fraudulent student loans. The Trump administration quickly moved to slow and reverse those rules, however, inspiring a class-action lawsuit from former Corinthian students that culminated in Judge Kim’s ruling that demanded collections stop earlier this year. Since then, thousands of students have been targeted by the Education Department.

“There have to be some consequences for the violation of my order 16,000 times,” Kim said, referring to the number of student borrowers who were impacted by the Education Department’s failure to abide by Kim’s order.

The for-profit college industry has taken heavy criticism in recent years, with over 1000 campuses closing in the past five years, leaving hundreds of thousands of students in severe debt and with unusable degrees. A study from Pew Research Center released in May found that the predatory lending and false advertising of for-profit colleges disproportionately hurts impoverished students, with the schools holding a higher percentage of enrollees in poverty than any other form of higher education.

For-Profit Education Industry Fills Trump Administration

In an administration that has already welcomed more corporate lobbyists in under three years than the two previous presidents did in two full terms, many conflict-of-interest beleaguered public officials have gone un-scrutinized in the Trump White House. Devos, a billionaire and sister of Blackwater CEO Erik Prince, has been a popular target for criticism since her nomination, but the multiple for-profit college industry veterans guiding her Department’s agenda have gained less attention.

Diane Auer Jones, a former executive at the for-profit Career Education Corporation and Bush administration official who resigned because she believed policies regulating universities were too harsh, is now a top deputy under Devos and “chief architect” of Education Department policy. She has since worked to reinstate accreditors, watchdogs who provide oversight on school quality, that Sen. Elizabeth Warren has called “some of the sleaziest actors in American higher education.”

Devos’ top assistant Robert Eitel, previously a vice president at for-profit networks Bridgepoint and Career Education Corp, led the effort to block a rule making it easier for students to file for debt relief on loans when colleges defraud them,” wrote the Intercept’s David Dayen in April, expanding on the trend defining Devos’ department. “Head of student enforcement Julian Schmoke was a former dean at for-profit college DeVry, and during his tenure, a special team at the agency investigating for-profit abuses was disbanded.”

Notably, President Trump founded a predatory for-profit college himself, Trump University, that reached a $25 million dollar settlement with New York state in 2018 for defrauding students.

Some experts believe the raw flagrancy and scale of Devos’ recently publicized violation provides indisputable evidence of contempt rather than pure incompetence.

“We think contempt is clear on the record presently before the court and expect that the court will issue that finding, regardless of what sanctions are imposed,” Harvard University’s Project on Predatory Student Lending legal director Eileen Connor told Bloomberg.

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Peter Castagno

Peter Castagno is a freelance writer with a Master’s degree in International Conflict Resolution. He has traveled throughout the Middle East and Latin America to gain firsthand insight in some of the world’s most troubled areas, and he plans on publishing his first book in 2019.

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