Education Secretary Betsy DeVos was held in contempt of court by a federal judge last week. (AP … [+]
Many people may hold various members of Trump’s cabinet in figurative contempt, but Federal Judge Sallie Kim has held Secretary of Education Betsy DeVos in literal contempt of court. The Department of Education will have to pay a penalty of $100,000 to a fund created for the benefit of students who attended schools operated and owned by the for-profit college conglomerate, Corinthian Colleges, Inc.
In 2014, the federal government found enough evidence that Corinthian committed widespread fraud by lying about its job placement rates that Corinthian lost eligibility for federal students loans. As a result, it has been forced to sell or close virtually all of its schools, leaving its students saddled with debt and poor job prospects.
Under the Obama Administration, the Department of Education provided full relief from federal loans to students who attended certain Corinthian programs. The Trump Administration and DeVos changed course and granted far more limited relief. The affected students brought suit, claiming that the Trump Administration’s change of policy was arbitrary and capricious and sought full relief for all students who had attended the Corinthian schools during the time period in which the fraud occurred.
In the course of the suit, Judge Kim enjoined the Department of Education from seeking to collect the outstanding federal loans from Corinthian students who had filled out an “attestation form” regrading the fraud. But, as Mitch McConnell might say, DeVos persisted.
According to Judge Kim’s order finding Devos in contempt: “[The Education] Department had erroneously sent 16,034 notices that payments were due to Corinthian borrowers. In response to those notices, 3,298 Corinthian borrowers made one or more payments . . . The Department also mistakenly notified at least 3,000 Corinthian borrowers that their loans were entering repayment, rather than stopped collection or forbearance status. After the preliminary injunction was issued, Defendants provided adverse reports to credit reporting agencies for 847 Corinthian borrowers and collected on the loans of 1,808 Corinthian borrowers through wage garnishment or offsets from tax refund.”
Judge Kim was not amused by the fact that, as a result of the Department of Education’s intransigence, students who had already been defrauded by Corinthian were further subjected to wage garnishment and damage to their credit rating. She also found the DOE had done little to correct its errors. She brought down the hammer, ruling: “there is no question that Defendants violated the preliminary injunction. There is also no question that Defendants’ violations harmed individual borrowers who were forced to repay loans either through voluntary actions or involuntary methods (offset from tax refunds and wage garnishment) and who suffered from the adverse credit reporting. Defendants have not provided evidence that they were unable to comply with the preliminary injunction, and the evidence shows only minimal efforts to comply with the preliminary injunction. The Court therefore finds Defendants in civil contempt.”
Even putting aside DeVos’ flouting of a judicial order, the Trump Administration’s policy of leniency toward regulation of for-profit colleges is profoundly misguided. It would be difficult to think of an industry more in need of strict government oversight. As spelled out in the generally conservative National Review: “There are certainly reasons for concern. A major one is the sector’s high federal student-loan default rate. According to the most recent numbers, 19 percent of students at for-profit schools had defaulted within three years of entering repayment, versus 13 percent at public institutions and 7 percent at private, nonprofit institutions. Their completion rates aren’t stellar, either. According to the federal Digest of Education Statistics, the latest six-year completion rate for people in four-year programs is a cringe-inducing 32 percent. Finally, there’s the cost: According to the College Board, which produces annual reports on college prices and aid, the average cost of tuition and fees at for-profit institutions was $15,130 last year. That was 70 percent higher than the state-resident price at an average four-year public college, though only about half the cost of a four-year, nonprofit private school.”
And all this is from an article entitled In Defense of For-Profit Colleges! The article argues that the high growth rate of these programs proves their value, but we know now that many for-profit colleges, not just Corinthian, utilized fraudulent practices to lure students. So, their high growth rate is hardly proof of their value. Under the Obama Administration’s “gainful employment rule” nearly all programs at for-profit institutions and a few other institutions had to meet a minimum repayment rate and reasonable student debt-to-income ratios. Trump and DeVos backed away from that rule. That’s a shame because for-profits earn most of their money from federal student loans, such as the ones the judge held DeVos in contempt for collecting. Because the default rates for these loans are so high, the American taxpayer is added to the list of victims of for-profit colleges. Contemptible indeed.
