The 2010’s were not a good decade for for-profit colleges. Investigated by Congress, sanctioned by regulators, charged by state attorneys general and sued by thousands of their students, the result was tumbling stock prices, shrinking enrollment and closure of hundreds of campuses. (See The For-Profit College Industry: Dropouts, Debt and Padlocked Doors.)
But there is a light at the end of the tunnel. It comes in the form of Trump’s choice for Secretary of Education Betsy DeVos. DeVos seems to know little about the public education that most American children receive, nor does she apparently care. But when it comes to investors looking to make a profit by exploiting underserved segments of students, she’s all in.
One of DeVos’s first actions was to fill the department with staffers whose background was in the for-profit college industry. She named Robert S. Eitel as her senior counselor. Eitel worked for both Bridgeport Education Inc. and Career Education Corporation. Bridgeport, which owned Ashford University, has been investigated by several states, was banned from receiving GI Bill benefits by a court in Iowa, was sued for violation of the Telephone Consumer Protection Act because of its robocalls, and admitted to the SEC that it had made unreliable statements of its earnings. It has since changed its name to Zovio. Career Education has shut down most of its 50 campuses in the U.S. and it too has changed its name, now calling itself Perdoceo Education Corporation. Eitel was a vice president at both of these firms.
Another former Career Education employee (senior vice president 2010-2015), Diane Auer Jones, was named by DeVos as senior advisor on post secondary education. She also worked for CollegeAmerica, an institution run by the Center for Excellence in Higher Education (CEHE). CEHE was put on probation by the agency that had accredited it. It has been sued by the State of Colorado and the Justice Department for its recruiting practices. Jones also spent time with a for-profit college lobbying concern, CECU.
The Department of Education general counsel position went to Carlos G. Muniz, a legal consultant to Career Education. At one time he was a deputy attorney general in Florida where he helped convince the attorney general not to take action against Trump University. He has since been appointed to the Florida Supreme Court. DeVos also hired attorney Linda Rawles, who was “regulatory counsel” at Bridgeport.
And then there is Julian Schmoke. His resume included 15 years as associate program dean at DeVry University. Only one year before he joined DeVos, the FTC had announced a $100 million settlement with DeVry over inflated claims of job placement. DeVry also settled with the New York State attorney general for $2.25 million. That action was based on fraudulent claims about graduates’ job placements and their salaries.
Schmoke’s new job at the DOE: head up the unit that was charged with investigating fraud involving student loans. By the following year, the New York Times was reporting, “Members of a special team at the Education Department that had been investigating widespread abuses by for-profit colleges have been marginalized, reassigned or instructed to focus on other matters, according to current and former employees. The unwinding of the team has effectively killed investigations into possibly fraudulent activities at several large for-profit colleges where top hires of Betsy DeVos, the education secretary, had previously worked.” Among the institutions that group had been investigating, DeVry Education Group.
In keeping with the overall focus of the Trump Administration, DeVos also set out to eliminate regulations that were created under the Obama department. In 2019 she rescinded the the gainful employment rule that had been created following the Higher Education Act of 2014. The gainful employment regulation was designed to identify schools where graduates found themselves without the ability to earn enough to pay off their student debt. Schools that did not meet that threshold would have their ability to receive federal loans and grants terminated. The department estimated that the rescinding of this rule would result in about $5 million in student aid going to institutions that otherwise would not have qualified.
And to make sure there would be no further barriers to for-profit colleges getting federal funds, the DOE reinstated a formerly discredited accreditation agency. In order to be eligible for federal funding, a college needs to be accredited. Public and private non-profit colleges and universities are usually accredited by regional agencies that have academic standards that the institutions are required to meet. For-profit colleges are more often accredited by national organizations that have less-stringent academic standards. One of those agencies is the Accrediting Council for Independent Colleges and Schools (ACICS). Among the schools that had been accredited by ACICS were Corinthian Colleges and ITT Technical Institute, both of which collapsed under a bevy of lawsuits and allegations of fraud. In 2016, the DOE announced that it would no longer recognize ACICS as a credible accrediting agency. Two years later DeVos restored ACICs recognition.
Just last month an investigative piece in USA Today found that ACICS had accredited Reagan National University, despite the fact that it has no faculty, no students and no campus.
An editorial in the New York Times in August of 2018 summed it up as follows: “Executives in the for-profit education industry will soon be sleeping better, secure in the knowledge that even the worst are no longer at risk of being thrown off their taxpayer-backed gravy train, no matter how epically they fail their students.”
What is perhaps even harder to understand is that DeVos has used every effort to avoid forgiving the debt of students who were defrauded or whose schools disappeared before they could complete their studies. This includes the 20,000 students who got shut out with the closing of Corinthian Colleges. (See All the Debt Without the Degree.)
There is a federal student loan to forgiveness program known as “borrower defense to repayment.” It is explained on the Department of Education web site as follows: “If your school misled you or engaged in other misconduct is violation of certain state laws, you may be eligible for ‘borrower defense to loan repayment forgiveness,’ which is the forgiveness of some or all of your student loan debt.”
It was expected that this law would provide relief to the students of Corinthian Colleges and other for-profit colleges that were shuttered. Not so fast, says Betsy DeVos. She was already at work making the process for applying for this benefit more difficult. For example, the requirement that you had to apply within six years was changed to three. And while the law had stipulated that once a school was determined to have defrauded its students, all were eligible for the forgiveness, the DeVos changes required each individual student to apply and be approved.
She was taken to court over the delay in forgiving these loans and was ordered by a federal court to proceed with the loan forgiveness. The students of Corinthian Colleges and others were finally notified by the DOE in December of 2018 that they would be eligible for loan forgiveness or a refund based on a provision known as the Automatic Closed School Discharge.
Despite being taken to court repeatedly, the DeVos DOE continued to ignore this order and continued to try to collect on these loans. After nearly one year DeVos was held in contempt of court.
It is not clear at this point whether the actions of Betsy DeVos and her Department of Education will lead to the revival of the for-profit college industry. They have a lot to overcome, like a track record of underperformance and fraud, and the existence of community colleges that offer similar courses of study at a far lower cost. What is clear is where students stand on the priority list of this Department of Education. Rock bottom.