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Defrauded Students and DeVos

"Betsy DeVos has done so many notable things in her role as Secretary of Education that have justifiably earned her contempt, that being held in contempt by a federal judge because of one failing is barely newsworthy."

Education Secretary Betsy DeVos announced Friday changes to federal debt relief regulations for student borrowers. (Photo: Gage Skidmore/Flickr/cc)

That shut her up real horrorshow and lovely. —A Clockwork Orange, Anthony Burgess

As a lawyer I am reluctant to speak unkindly of a federal judge, but I cannot resist observing that U.S. Magistrate Judge Sallie Kim of San Francisco can only be described as a something of a Johnny come lately. It was she, who on October 24, 2019, held Education Secretary Betsy DeVos in contempt. In holding Betsy in contempt, Judge Kim was doing what many of us have been doing ever since Betsy first appeared on the national stage. In fairness to Judge Kim it has to be noted that Betsy gave the judge only one reason to hold her in contempt whereas Betsy has given the rest of us a plethora of reasons. In fact, Betsy has given us so many reasons that we can only look wistfully at Ben Carson.

Readers may remember Ben Carson. He’s the Secretary of Housing and Urban Development and has the distinction of being one of the few cabinet secretaries who has been with trump since trump ascended to the throne. Following his appointment, Mr. Carson made news by ordering a mahogany dining table, chairs, and hutch for his office that cost taxpayers $33,000. In explaining the purchase during a hearing before the House Appropriations Committee he said: “It’s my understanding that the facilities people felt that the dining room table was actually dangerous. People are being stuck by nails, a chair collapsed with somebody sitting in it, it’s 50 years old.” At the conclusion of the hearing the purchase was approved, and Ben has not been heard from since. For that, he and we can be grateful. Would that Betsy DeVos had followed in his footsteps.

Betsy has done so many notable things in her role as Secretary of Education that have justifiably earned her contempt, that being held in contempt by a federal judge because of one failing is barely newsworthy.

Betsy’s four immediate predecessors were protected by the small security force that is attached to the Department. After Betsy was confronted by a small group of protestors on a visit to a school, she demanded that she be given her own security force. She was. In FY2019 it cost the taxpayers $6.24 million. After Betsy was confirmed by the Senate, she made up for her own lack of knowledge about the world of education, by hiring people who had been closely identified with the for-profit college business, a business of which she was very supportive. Here are a few of the people she hired.

She hired Julian Schmoke and placed him in charge of the unit that investigates fraud in higher education. From 2008 to 2012 Mr. Schmoke was associate dean of the College of Engineering and Information Sciences at DeVry University. DeVry is best known for paying the FTC $100 million for students it defrauded. It also paid the state of New York $2.25 million, and the State of Massachusetts $455,000 for the same conduct.

As her senior counsellor, Betsy hired Robert Eitel who, prior to joining the Department, worked at Bridgepoint Education. That institution was fined $30 million on account of deceptive student lending practices.

Carlos Munoz was hired to serve as Betsy’s General Counsel for the Department of Education. Before his employment he provided consulting services to Career Education Corporation. Diane Auer Jones was hired as senior advisor to the Department of Education post-secondary education. Before that, she was senior vice-president at Career Education Corporation. That was the company that was forced to forgive almost $500 million in student debt because of its fraudulent practices.

In 2017 Betsy “reset” the Obama era rule known as the “borrower defense to repayment.” The rule addressed defrauded students’ obligations to repay loans they had taken to attend institutions such as Corinthian College. Corinthian was a for-profit chain of colleges with 70,000 students at more than 100 campuses that went out of business under a regulatory crackdown. In response to that and similar failed for-profit institutions that left students with millions of dollars in loans they had obtained to attend those institutions, the Obama administration simplified the “borrower defense to repayment” rule that, among other things gave instant relief to students from repaying loans in cases where for-profit institutions such as Corinthian were found to have committed fraud or misled students.

Betsy revised the rule in July 2017 explaining that the Obama rule had created a “muddled process that is unfair to students and schools and puts taxpayers on the hook for significant costs.” Her revised rule offered “tiered” loan forgiveness in fraud cases. How much a defrauded student could receive depended on the needs of the defrauded student rather than the amount the fraud had cost the student.

Betsy was sued by attorneys general from several state alleging Betsy violated federal law by making changes to the law without permitting stakeholders to be heard. In May 2018 Judge Kim issued a preliminary injunction blocking Betsy from collecting loans. Undeterred by the injunction, Betsy continued collecting the loans from some 16,000 borrowers who had attended Corinthian college. At the October 2019 hearing in which Judge Kim held Betsy in contempt of court, she said Betsy made only minimal efforts to comply with her May 2018 order and fined her $100,000.

Betsy will not have to personally pay the fine. It will be paid by the taxpayers-the same taxpayers Betsy was trying to protect from being “on the hook for significant costs” under the Obama “Borrower defense to repayment” that she “reset” in 2017. Go figure.

Christopher Brauchli

Christopher Brauchli

Christopher Brauchli is a columnist and lawyer known nationally for his work. He is a graduate of Harvard University and the University of Colorado School of Law where he served on the Board of Editors of the Rocky Mountain Law Review. He can be emailed at brauchli.56@post.harvard.edu. For political commentary see his web page at http://humanraceandothersports.com

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