- The Washington Times
Monday, March 9, 2020

House Democrats on Monday pushed the Education Department’s internal watchdog to investigate whether the agency’s loan-forgiveness formulas were shortchanging students possibly swindled at for-profit colleges.

Rep. Bobby Scott of Virginia, chairman of the Education and Labor Committee, asked the department’s inspector general to conduct the probe following allegations the formulas were fudged in December to make it more difficult to get loans forgiven for students who attended for-profit schools.

The department confirmed receipt of the letter Monday but offered no immediate response to the allegations.

Democratic lawmakers have long feuded with Education Secretary Betsy DeVos over for-profit colleges, beginning at her confirmation with criticism that she made much of her fortune investing in for-profit colleges.

In the letter to the inspector general, Democrats noted that former students at Corinthian Colleges or ITT Technical Services faced significant difficulties in getting debt relief under the formula.

Critics of for-profit colleges consider those two schools to be prime examples of higher education scams. They have called for loans for those colleges to be forgiven entirely.

Corinthian, which was once one of the largest career college chains, shut down and filed for bankruptcy in 2015 amid allegations of fraud.

“On Dec. 10, the Department unveiled a new methodology for calculating relief for defrauded borrowers,” one that in some cases would only entitle borrowers to full debt relief if they could document “negative earnings,” which is impossible, Mr. Scott and committee Democrats wrote in the letter.

The Department tinkered with the formula so that it will “provide only partial relief to defrauded borrowers,” and that its own experts call “nonsensical and harmful to students,” they wrote.

Student loan debt in the United States now stands at more than $1.5 trillion, exceeding the nation’s credit card debt. Under Barack Obama’s administration, the federal government became the sole source and backstop of college loans.

Politicians are now debating what to do with this gigantic loan portfolio. In the 2020 presidential campaign, Vermont Democratic Sen. Bernie Sanders has offered to forgive all student debt which would hand the bill to taxpayers.

The mounting bill has also triggered a search for scapegoats. Opponents of for-profit schools say they are largely to blame for the crisis since the highest default rates are found among such students. Since 2008, the average student loan debt for those who borrowed at for-profit schools has ballooned 26% to $39,950, according to Forbes.

Ms. DeVos has argued the focus on for-profit colleges is misguided because they account for a much smaller fraction of the overall student loan debt.

The for-profit education sector insists it was unfairly targeted for annihilation under President Barack Obama’s administration.

In June, Ms. DeVos scrapped an Obama-era regulation known as “gainful employment” that purported to protect students from predatory for-profit schools. She also sought to freeze some student loan forgiveness programs put in place under the Obama administration, which was challenged in court.

A federal judge appointed by Mr. Obama sided with 18 Democratic state attorneys general and declared Ms. DeVos’ freeze “arbitrary and capricious.”

Now, the department’s inspector general needs to investigate whether Ms. DeVos or her staff failed to offer sufficient student loan help to former for-profit attendees, said the lawmakers.

“We have concerns that the Department did not consult internal or external statistical experts, did not have the methodology approved through proper channels, and did not sufficiently analyze the costs and benefits associated with its methodology,” Mr. Scott said.

• James Varney can be reached at jvarney@washingtontimes.com.

Copyright © 2023 The Washington Times, LLC.