Betsy DeVos Contemptible, Also In Contempt Of Court
Education Secretary Betsy DeVos was held in contempt in federal court last Thursday and fined $100,000 for failing to follow a court order to lay off debt collection from students who had applied for forgiveness of their student loans to a for-profit college. The students were supposed to be eligible for relief of their debts to schools run by super-fraudy Corinthian Colleges, which went belly-up in 2014.
Magistrate Judge Sallie Kim, in the San Francisco Federal District Court, ordered the Ed department to cough up $100,000, and while we wish it could come out of DeVos's own deep pockets, it will at least go to compensate students screwed over by DeVos and her merry band of fraud enablers, who have been entitled to debt relief since the Education Department under Barack Obama found Corinthian had defrauded them.
The New York Times story on DeVos's utter incompetence -- or outright malice? -- in handling the mess is a jaw-dropper. Almost every paragraph will leave you cursing.
Fortunately, the students had some good guys on their side, in a lawsuit against the department by two groups: the Project on Predatory Student Lending, of Harvard Law School's Legal Services Center, and a group called Housing and Economic Rights Advocates. The nonprofits argued in court that DeVos and the department had violated the law by failing to protect the students.
Toby Merrill, director of the project, said that the ruling demonstrated "the extreme harm" of Ms. DeVos's actions. "Secretary DeVos has repeatedly and brazenly violated the law to collect for-profit college students' debts and deny their rights, and today she has been held accountable," she said.
Thursday, the Education Department issued this video statement on Twitter, saying it was very very disappointed in the mean judge, but also insisting it was very sad about the "mistake," and working to make everything just fine for the students who'd been ripped off:
The video by Federal Student Aid Office chief operating officer Mark Brown said that loan servers had "mistakenly" demanded payment from roughly 16,000 students or parents. Brown
said the department had taken swift action to respond, including refunding nearly all payments that borrowers should not have had to make, returning tax refunds and wages that were seized, and updating credit reports for affected students and parents. He said the department had also formally reprimanded loan servicers that collected debts, and initiated personnel action against Education Department employees who failed in their oversight roles.
Of course, that fuckery was helped along by some policy changes made by DeVos herself: Instead of quickly dealing with the backlog of student claims for debt forgiveness inherited when the Obama administration left office,
DeVos instituted a new system for borrower defense claims that granted little to no debt forgiveness if those students were found to have earned a livable wage. The Project on Predatory Student Lending filed a lawsuit challenging that system.
Last December Judge Kim told DeVos to stop being an asshole and get the students' debt forgiven. Instead, DeVos appealed the ruling, and while no debt collections were supposed to continue while the case moved forward, the loan servicers kept right on hounding some 16,000 students for debts they shouldn't have been on the hook for at all, and even garnished some people's wages and tax refunds.
The Project on Predatory Lending said that more than 3,000 borrowers made payments that they were not, in fact, required to make. More than 800 students have had their credit reports tarnished, and 1,800 had their wages garnished or tax refunds seized. More than 1,100 remain in limbo because the department has not yet confirmed whether they are in the correct repayment status.
In a hearing earlier this month, Judge Kim said, "I'm astounded, really [...] I feel like there have to be some consequences for the violation of my order 16,000 times." Again, seizing and selling off one of DeVos's yachts -- we think she has like 40 or 50, she wouldn't miss one -- might have been preferable.
And even now, the relief in the case will only help the 16,000 or so students who were ripped off a second time by the Education Department's incompetence. Over ten times as many students are still waiting to have their applications reviewed:
The department has essentially stopped evaluating borrower defense claims — leaving borrowers in limbo, sometimes for years — while it waits for the courts to resolve its appeal. The agency had 210,000 pending claims awaiting a decision as of June, up from the 106,000 claims it had sitting in its queue a year earlier.
Earlier this month, DeVos dismissed criticism from Sen. Elizabeth Warren, who noted that DeVos faced contempt charges. In typical Trump Cabinet fashion, DeVos told the senator to stop lying, and besides, it was only a small number of people having their lives ruined by DeVos's shitty leadership. While she was at it, DeVos linked to that Fox News bullshit claiming Warren had lied about getting fired for being pregnant. Clearly a relevant story to DeVos's student debt fuckup.
Looks to us like Warren was exactly right: DeVos was held in contempt for failing to follow the court's order.
And that "total overhaul" of loan servicing DeVos mentions? Also bullshit: It'll hurt students and families, not help them.
In August, the Education Department rewrote its rules for the borrower-defense program, making it significantly harder for borrowers to qualify. The new policies will apply to federal student loans made from July 2020 onward.
In other Education Department news, also on Thursday, another DeVos appointee, A. Wayne Johnson, who preceded Brown as COO of the federal Student Loan Office and later was put in charge of revamping Education policy toward borrowers and servicing companies, quit in disgust over the complete dysfunction of the student loan system. Johnson called for massive forgiveness of student debt, because research suggests most of it will never be repaid. Johnson also announced he would run for the US Senate seat from Georgia that Johnny Isakson plans to retire from this year, before his term is up.
Johnson said the high number of student loan defaults and the ongoing failures of a program to forgive loans made to people in public service were the main reasons for his call to just cancel student debt instead.
"We run through the process of putting this debt burden on somebody…but it rides on their credit files—it rides on their back—for decades," he said, adding, "The time has come for us to end and stop the insanity."
Johnson released an outline of a debt relief plan that, like Elizabeth Warren's higher education plan, would forgive the first $50,000 of student loan debt. But Johnson's plan is even more ambitious: Where Warren's plan would forgive $50K per family, he proposes $50K per individual, and to win support from the "No way -- I paid MY loans" crowd, he'd also offer up to $50K in tax credits to people who have paid off their loans in full or in part.
But just so he can say he's still a Republican, Johnson said once most existing loan debt is forgiven, he wants the federal government to get out of the business of student loans altogether, albeit through some big socialist spending: He'd offer all college students a voucher for up to $50,000 to cover college or grad school, with no need to repay it.
It's kind of a cool idea, though it would have to get through Congress, and Johnson is a decidedly longshot candidate for Senate. The Wall Street Journal doesn't say anything about whether he'd build in any safeguards to prevent such grants from going to fly-by-night schools like Corinthian College, either. Jesus, can you imagine the scams that would spring up for THAT kind of payout?
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