Betsy DeVos: Rollback of Student Borrower Protections, For-Profit College Deregulation
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DeVos, a billionaire Michigan donor with ties to the for-profit education industry through her family's investment portfolio, was confirmed in February 2017 in a 50-50 Senate vote — the first cabinet confirmation requiring Vice President Pence's tiebreaking vote in history. She immediately moved to suspend the Obama administration's Borrower Defense to Repayment rules, which provided a path for students defrauded by schools to have their federal loans discharged. More than 100,000 borrower defense applications accumulated while DeVos's department delayed processing them. Courts found the delays violated federal law. She also rescinded the Gainful Employment rule that required for-profit programs to demonstrate graduates could earn enough to service their student debt.
Overview
Students who were defrauded by for-profit colleges — institutions that in some cases sold worthless degrees at high prices to low-income and minority students using federal loan money — had a legal pathway to debt discharge. DeVos suspended that pathway, watched more than 100,000 applications pile up, was held in contempt of court for violating orders to process them, and then finalized new rules making relief harder to obtain. Courts struck down multiple provisions of her rules.
The Borrower Defense Program
The Borrower Defense to Repayment program exists because federal law provides that students defrauded by colleges can seek discharge of their federal student loans. The Obama administration built out a claims process following the collapse of Corinthian Colleges — an institution that had enrolled hundreds of thousands of students, collected billions in federal loan money, and left graduates with degrees that employers did not recognize.
DeVos suspended the processing machinery. Applications accumulated. Students who had been defrauded were in limbo — their debt continuing to accrue interest, their claims unprocessed. A federal judge found the delays violated federal law. The department continued to collect payments from Corinthian students in violation of a specific court order. The judge held the department in contempt and imposed a $100,000-per-day fine.
The Accreditor Reinstatement
ACICS had been the primary accreditor for Corinthian and ITT Tech — two of the largest for-profit college failures in American history. Federal policy had revoked ACICS recognition as an accreditor, cutting off the institutions it accredited from federal aid. DeVos moved to reinstate it.
The effect of ACICS reinstatement was to restore federal loan access to institutions operating under an accreditor that had demonstrably failed at its oversight function.
The Conflict Question
The DeVos family had investment exposure to the for-profit education and student lending industry. The regulatory approach that DeVos implemented systematically benefited that industry. She recused from some decisions but not all. The pattern of the deregulation — suspending borrower protections, rescinding employment outcome requirements, reinstating failed accreditors — aligned with the policy preferences of an industry in which her family had financial interests.
Timeline
Sequence of events
February 7, 2017
DeVos confirmed 50-50 — Pence casts historic tiebreaker
DeVos is confirmed as Secretary of Education by a 50-50 Senate vote, the first time in history a Vice President had to cast a tiebreaking vote to confirm a cabinet nominee. Two Republican senators — Lisa Murkowski and Susan Collins — voted against her.
June 14, 2017
DeVos suspends Borrower Defense rules — 100,000 applications stall
The Department of Education suspends the Obama-era Borrower Defense to Repayment rules, halting processing of claims from students defrauded by institutions including Corinthian Colleges and ITT Tech. More than 100,000 applications accumulate without action over subsequent years.
July 1, 2017
Gainful Employment rule rescinded
DeVos rescinds the Gainful Employment rule that required for-profit programs to demonstrate graduates could earn enough to service their student debt. Critics argue the rescission removes a key accountability mechanism for predatory institutions.
June 25, 2019
Federal judge holds DeVos in contempt — $100,000 per day fine
A federal judge holds the Department of Education in contempt for continuing to collect loan payments from defrauded Corinthian College students in violation of a court order to discharge their debts. The department is fined $100,000 per day. The department says it was an error.
August 10, 2020
DeVos finalizes restrictive Borrower Defense rules — courts later strike provisions
DeVos finalizes new Borrower Defense regulations that significantly limit student debt relief eligibility, including means testing and partial relief frameworks. Courts subsequently strike down several provisions as arbitrary and capricious. The Biden administration later rescinds the DeVos rules and processes the accumulated claims.
Sources
- ↑ DeVos Is Defying a Court Order, Students Say. A Judge Agrees. — The New York Times
- ↑ DeVos finalizes new borrower defense rules, sharply limiting student debt relief — The Washington Post
- ↑ DeVos rolls back protections for defrauded student borrowers — The Associated Press
- ↑ DeVos Education Department Record on Student Borrower Protections — Student Borrower Protection Center
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