Friday, October 25, 2019

College Loans: Contempt And Forgiveness At The U.S. Department of Education

Posted By on Fri, Oct 25, 2019 at 2:22 PM

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It's been a strange couple of days on the college loan front at Betsy DeVos's Department of Education. The department was held in contempt of court for screwing over students and parents who owe money on loans they are not required to repay. During the same week, a high ranking department official proposed student loan forgiveness on a massive scale.

The Ed Department has been held in contempt of court and ordered to pay a $100,000 fine. The reason: It continued to bill ex-students of the for-profit Corinthian College chain, even though it had been established that the colleges defrauded the students.

Obama's Ed Department created the process of forgiving the loans, and Trumpsters are duty-bound to trample on Obama's legacy. Combine contempt of Obama with the Trump administration's preference for the free-est of free market capitalism at the expense of the consumer, and you have two reasonable explanations for the decision to keep the loan payments flowing.

DeVos's department has a different explanation. It says it shouldn't be held in contempt, claiming billing those 16,000 students was simply a mistake. It seems they would rather be considered incompetent than ill intentioned, though I suspect a combination of the two. The department is in the process of refunding payments and, when necessary, fixing damaged credit ratings of students and their parents.

In another student loan-related story, a high level appointee in the Office of Federal Student Aid decided, after seeing the loan situation up close, we need to "stop the insanity" of burdening students with loans. Wayne Johnson proposes forgiving the first $50,000 in student debt. For people who have already repaid their loans, he proposes a tax credit of up to $50,000. For new students, he proposes a $50,000 government voucher which wouldn't need to be repaid.

Don't expect the proposals to be taken up by DeVos & Co. Johnson resigned from the Ed Department.

When Johnson was appointed to run the financial aid operations, he looked like a typical Trump administration insider. Johnson had been part of credit card and banking firms and started his own student loan company. It was reasonable to fear he would follow the lead of other lobbyists and corporate toadies appointed since Trump's election and advocate for the loan industry to the detriment of students and parents encumbered with tens of thousands of dollars of debt.

However, other parts of Johnson's resume indicate that he might not act as a pawn of the loan industry. He recently earned a doctorate in educational leadership. His dissertation was titled, “Eyes Wide Shut: Understanding Private Student Loan Indebtedness.” Among other things, the dissertation noted that many loan officers were "willfully negligent" in explaining the loans to students. The dissertation also described how the loan burden harmed students in the long term.

Before Johnson took the job at the Ed Department, he applied to be superintendent of a Tennessee school district. Apparently, he cares about students and education, not just making money.

I'm encouraged that a man of good faith like Johnson would look at the data, deplore the damage caused by out-of-control student loans and look for solutions. Johnson is a Republican, which makes his proposal even more encouraging to me. A few days ago, Elizabeth Warren put out her education plan, which has a similar proposal relating to student loans. Johnson's plan actually goes a step further than Warren's.

And I'm not at all surprised that Betsy DeVos and her Ed Department have acted contemptibly when it comes to for-profit colleges and student loans. A privatizer from way back, DeVos has always sided with the money makers in education and the loan industry over the people they victimize.

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