To Fix Student Debt, We Must First Tame Corruption

By Julie Margetta Morgan |

With $1.5 trillion in outstanding student debt, more than 8 million borrowers in default, and millions more delinquent on their repayments, the student loan system today is holding Americans back from economic opportunity and stability. Faced with such troubling trends, Department of Education Secretary Betsy DeVos should be focused on relieving these burdens for borrowers. Her actions, however, reveal an agenda skewed toward the top of the economy: With one proposal to cut approximately $13 billion in relief for defrauded students, Secretary DeVos is hard at work enriching industry insiders—and deepening our country’s student debt crisis in the process.

In the past few weeks alone, DeVos has simultaneously clamped down on policies that helped borrowers get out of debt and propped up industry players, including student loan servicers and debt collectors, who are exploiting the student loan program and thus adding to our country’s student debt crisis. Last week, the Department of Education released a proposed revision to its “borrower defense” rule. The rule is supposed to protect students when they’ve been hurt by their colleges’ acts and omissions—such as lying to entice students to enroll—by canceling their debt. DeVos’ changes make it all but impossible for borrowers to invoke the rule, leaving them mired in the debt that was caused by their colleges’ misdeeds. And just a few days ago, word leaked from the Department of Education that Secretary DeVos plans to gut another key rule aimed at protecting students and taxpayers from paying for inadequate, even negligent, educational programs. Student advocates are dismayed by these changes, but colleges will be pleased—particularly predatory ones that build their businesses on luring students into poor-quality programs.

The Department of Education has been taking even more steps to shield student loan servicers and poor-quality colleges from accountability. Leaked recordings suggest that the department is pushing an independent accrediting agency to reinstate approval for campuses owned by Dream Center Education Holdings that the accreditor had previously judged as unworthy, in an effort to save Dream Center from having to close the schools. And recent court filings show that Secretary DeVos has been protecting the student loan servicer Navient from a lawsuit filed by the Consumer Financial Protection Bureau (CFPB) by blocking access to key information needed to move the lawsuit forward. The Department of Education again went to bat for Navient and other student loan servicers when it turned industry talking points into official agency guidance that tries to block states from instituting consumer protections against abusive loan servicing practices, claiming that federal law preempts state intervention.

The Department of Education can surely come up with vague justifications to support the moves described here, but the driving force behind its decision-making is clear: those with money and power get what they want, and those without influence—which, in the current system, is students, borrowers, and even taxpayers—get nothing at all. Take Navient, for example. The company has a track record of high-profile problems, from cheating military servicemembers to withholding more than $20 million owed to the federal government. But Navient has a potent strategy for keeping its lucrative federal contracts: cultivating a vast network of influence in Washington, DC.

Navient spends over $2 million a year on lobbying expenditures. In addition to its in-house efforts, it hires lobbying firms with powerful connections, including former legislators and congressional staff members, and it participates in six trade associations that lobby on its behalf. And Navient created a political action committee (PAC) that donates to a variety of candidates, both Democrats and Republicans: 58 House members and 25 senators, including the chairs of the committees responsible for oversight of Navient, Rep. Virginia Foxx (R-NC) and Sen. Lamar Alexander (R-TN).

Lawmakers may not see a correlation between their policy views and their campaign funds, but Navient certainly sees a connection: The company states that its PAC donates to those “whose views on specific issues are consistent with the company’s priorities.” So when the Department of Education tries to preempt states’ ability to regulate Navient—a move that should enrage policymakers who claim to believe deeply in states’ rights—it only takes a glance at Navient’s political contributions to understand why most federal legislators have been silent on the issue.

It’s easy to overlook this kind of influence peddling—especially in light of the near-daily stream of corruption scandals in the Trump administration. But, as the exploitation of higher education within the Department of Education exacerbates our nation’s student debt crisis, Americans cannot afford such blatant disregard. Borrowers—who are already left behind in today’s economy—will struggle for decades to repay debt incurred at a for-profit college that Secretary DeVos protected or even bolstered. Others will feel the effects of student loan defaults caused by Navient’s misdeeds on their bank accounts and credit scores for years to come. And at the end of the day, the student loan industry will walk away with their profits, and it will be borrowers and taxpayers paying the price.

 

 

Julie Margetta Morgan is a Fellow at the Roosevelt Institute. Julie most recently served as a Senior Program Officer at the Bill and Melinda Gates Foundation. Prior to joining Gates, she was a senior policy advisor to Senator Elizabeth Warren, where she was responsible for developing and implementing policy proposals on a range of education issues, including student loan refinancing, college affordability, and student loan servicing reform. She previously served as Director of Postsecondary Access and Success at the Center for American Progress, and she holds a Ph.D. in higher education and a J.D. from Boston College.