State AGs Push DeVos to Protect Federal Student Financial Aid

Betsy DeVos (Courtesy of whitehouse.gov)
Betsy DeVos (Courtesy of whitehouse.gov)

An old adage teaches, “if at first you don’t succeed, try, try again.” In recent months, the troubled Accrediting Council for Independent Colleges and Schools (ACICS) tried and lost two legal attempts to recover eligibility for federal education funds.

But don’t be surprised if a third ACICS effort soon makes its way to the desk of U.S. Education Secretary Betsy DeVos. Secretary DeVos brings to her position a long record of support for private education. The vast majority of schools formerly accredited by ACICS were private, for-profit colleges.

If ACICS sounds familiar to readers, there’s a reason. In December 2016, then-Education Secretary John B. King ruled that the educational accreditor would no longer be recognized by the department. That action also meant that none of ACICS’ 240 institutions would have access to federal funds — including the 17 institutions that have been sued by either state or federal officials for defrauding students and other deceptive practices.

On Dec. 21, ACICS’ request for a temporary restraining order was denied. Then in late February, DC’s U.S. District Judge Reggie B. Walton refused to rescind the Education Department’s ruling.

So what would make ACICS and its institutions so determined to have federal funding restored?

The answer is money. Each year, $129 billion is spent on federal student aid. In just one year — 2015 — ACICS schools received nearly $5 billion in taxpayer dollars. It is also legal for up to 90 percent of for-profit college revenues to come from Title IV federal aid. If veterans’ financial aid is added to that of Title IV, taxpayer dollars can subsidize even more than 90 percent of for-profit revenues.

These and other concerns have now led to attorneys general from 17 states and the District of Columbia sharing their collective concerns directly with Secretary DeVos. Among those signing the communique were attorneys general representing largely populated states such as Illinois, Maryland, New York, North Carolina and Pennsylvania.

Noting their support to protect students and taxpayers, the letter from the attorneys general alerted the new secretary to three specific and major concerns:

  1. How for-profit schools have harmed student borrowers;
  2. Why vigorous oversight of accreditors is in the best interests of taxpayers and students; and
  3. The importance of preserving two departmental rules — the Gainful Employment Rule and the Borrower Defense to Repayment rule set to go into effect at mid-year.

“We are deeply concerned that rollbacks of these protections would again signal ‘open season’ on students for the worst actors among for-profit post-secondary schools,” wrote the attorneys general. “Over the past 15 years, millions of students have been defrauded by unscrupulous for-profit post-secondary schools. With accreditors asleep at the wheel, State Attorneys General Offices have stepped in to stop some of the worst abuses.”

“Many schools inflated job placement numbers and/or promised career services resources that did not exist,” the letter continued. “Many students were placed in loans that the schools knew from experience their graduates could not pay. … In short, the entire for-profit education system was failing students and taxpayers.”

The Gainful Employment Rule is designed to ensure that programs equip graduates with skills and employment opportunities that enable them to successfully repay their student loans. Should annual loan payments be more than 30 percent of discretionary income or 12 percent of earnings in two out of three consecutive years, the educational program loses access to Title IV federal student loans and grants.

Similarly, the Borrower Defense to Repayment Rule, set to take effect on July 1, provides legal recourse for students who were harmed by for-profit colleges.

Many of the issues raised in the 7-page letter to Secretary DeVos were noted in an earlier report prepared and released last fall by the office of Sen. Elizabeth Warren.

“[T]his taxpayer investment is wasted when student aid funds are funneled to sham colleges — many of which operate as for-profit entities that use federal student aid dollars to enrich top executives. Meanwhile, students are left with a shoddy education and a staggering debt load, unable to rely on their education to secure a job that will help them responsibly repay their loans,” states the report.

“The title of a recent Century Foundation report characterizes the situation we find ourselves in perfectly: The For-Profit College Story: Scandal, Regulate, Forget, Repeat,” said Robin Howarth, a senior researcher with the Center for Responsible Lending specializing in student loans and related debt. “We now have the opportunity to break this vicious cycle that is so costly to students and taxpayers. It’s imperative that we keep the pressure on for-profit colleges through prudent regulation and oversight thus avoiding a repeat of past abuses.”

Charlene Crowell is the communications deputy director with the Center for Responsible Lending. She can be reached at Charlene.crowell@responsiblelending.org.

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This correspondent is a guest contributor to The Washington Informer.