Backing DeVos Repeal Of Obama Rules, For-Profit Colleges Vilify Students

01/09/2018 11:56 am ET Updated Jan 11, 2018

Today is the second day of the second round of the Betsy DeVos Department of Education's regulatory meetings to repeal and replace the Obama administration's borrower defense rule -- a rule that was aimed at protecting students and taxpayers from predatory practices by for-profit colleges. The DeVos Department's intentions already have been made apparent, with a series of draft provisions that are entirely one-sided, seemingly aimed at allowing predatory schools to return to an era of impunity.

By now, we've heard at the meeting the main arguments of the for-profit college industry on these issues, supporting the DeVos draft rule wholeheartedly. They are familiar and disturbing arguments.

Above all, the for-profit college industry has an extraordinary and troubling sense of entitlement. School operators all believe, or at least all say, that their own schools are good for students. They seem to believe it follows that they are permanently entitled to millions or even billions annually in federal taxpayer money -- many for-profit colleges get close to 90 percent of their revenue from federal student grants and loans -- and that any regulation that would impose burdens, adjustments, or risks of any significance must necessarily be bad. They feel that way even though a well-constructed rule has the potential to drive out of the market the unscrupulous schools that compete for the same students with false promises and that give the industry its horrible reputation for fraud and abuse.

Thus the industry seems enthusiastic about the DeVos-Trump draft borrower defense rules, which essentially nullify the 1994 law that gives former students who are ripped off by their colleges -- colleges approved for federal aid by the Department -- the right to seek cancellations of their federal student loans. The draft rules, released last week, erect numerous and redundant barriers to students getting the benefit of that law.

The DeVos draft rules are so biased against students that the room heard panel member Michale McComis, the head of the major for-profit college accreditor, ACCSC, say that combining all the barriers to loan cancellation "feels a little stacked against the student." McComis later described the collective constraints as "belts and suspenders on pants that are too tight." He added, "I find it just not reasonable that a student would be able to achieve anything... If that's the intent, I'm not sure why we're here."

Why we're here seems apparent. The DeVos Department is barred by law from undoing the Obama rules without going through the same negotiated rule-making process that created the rules in the first place. Hence, eleven meetings over several months, gathering various stakeholders to address the issues, with a parallel set of meetings to reverse the Obama gainful employment rule, another measure aimed at curbing predatory school abuses.

Much of Monday's meeting was focused on just one of the barriers in the DeVos rule: A former student would be required to prove her right to loan relief to the Department by a demanding "clear and convincing evidence" standard, as opposed to the "preponderance of the evidence" standard normally used in civil lawsuits. It's the difference, essentially, between having to convince a decision-maker that there's a 75 percent chance you're right, as opposed to 51 percent.

Pro-student negotiators quickly exposed the unfairness of this requirement.

Abby Shafroth of the National Consumer Law Center asked the DeVos Department why it was demanding this higher proof standard for students, most of whom are of low to moderate income and cannot afford lawyers.  A lawyer for the Department replied flatly that the normal standard doesn't protect the interests of schools and taxpayers sufficiently; he hastened to add that the Department "can certainly re-evaulate."

The DeVos Department's position that stronger debt relief for students is worse for taxpayers is short-sighted at best, dishonest at worst.  If the Department granted abused students meaningful debt relief, it would quickly have a stronger sense of the enormous costs of allowing dishonest and poorly performing schools to participate in the federal aid program, and it would get tougher on schools and remove the worst actors from federal aid more quickly. This is exactly what bad schools in the industry are afraid of.

Joseline Garcia of the US Student Assocation asked the DeVos Department representatives to walk through how a student without a lawyer can prove borrower defense by clear and convincing evidence. The Department lawyer declined. She also asked how many former students of the collapsed predatory Corinthian Colleges could have individually met the clear and convincing standard. The lawyer again didn't have an answer.

Shafroth noted that the school, not the student, will have all the relevant documentation. Students aren't preserving evidence of deception when they enroll, because they don't think they're being scammed at the time -- or else they wouldn't enroll. In the loan relief proceeding devised by the DeVos Department, the student has no right to obtain documents from the school. Shafroth concluded that a clear and convincing standard, by itself, "would effectively do away with borrower relief in almost all circumstances."

Ashley Harrington of the Center for Responsible Lending added that this provision, combined with the rest of the draft DeVos rules, would allow even the worst schools to evade borrower defense claims.

Every time the pro-student advocates exposed troubling aspects of the DeVos draft, they were countered by industry representatives on the panel, mostly two lawyers, both tied to awful predatory schools: Linda Rawles, who is a lawyer for Ashford/ Bridgepoint; and Aaron Lacey, who previously worked at Vatterott College. Both schools have well-documented records of deceiving and abusing students, and both schools have faced significant law enforcement investigations and actions.

Rawles and Lacey endlessly defended the draft DeVos rules; indeed, Rawles took credit for suggesting the "clear and convincing" evidentiary burden for students.

Rawles offered a series of dubious justifications for imposing a higher evidentiary burden on students. She claimed students will understand "clear and convincing," because it's sometimes used in campus disciplinary proceedings. She later asserted that "clear and convincing" just means "asking for some evidence." Except, no, it does not mean that. And when another negotiator said it sounded like the less-demanding preponderance of evidence standard means that if it's "he said/she said," the student wins, Rawles nodded her head. But in fact, under a preponderance standard, the student would still have the burden of proof and thus would lose a "he said/she said" draw.

Rawles later said that the panel discussion should stop focusing on the abuses of now-defunct Corinthian Colleges. "We're in a different world now," she said. Suzanne Martindale of Consumers Union then pointed that out that there are still concerns about ongoing bad practices, as illustrated by California's attorney general last month suing Ashford / Bridgepoint for systematic fraud. That again, is the for-profit college company for which Linda Rawles works as outside legal counsel. It's also the company where Robert Eitel worked before becoming a senior adviser to Betsy DeVos at the Department of Education. So what is Rawles talking about?

Ultimately, Rawles and other for-profit college representatives fell back on the industry's favorite boogeyman: the slick con artist student who will seek, and obtain, loan relief when the school in fact did nothing wrong.

What kind of scam would that be?

A student would have to go to school, put in all the hours of classes, studying, and commuting; find child care; commit personal and family money, plus any Pell grants or GI bill benefits; and take out the high-interest private loans often required to attend expensive for-profit schools. Most of that time and money would never be coming back. The only thing this alleged scam could possibly accomplish was cancellation of the federal student loans -- a significant piece, but far from the whole thing.

Even then, under the Obama-era borrower defense rule, federal loan cancellation would be far from a sure thing. Betsy DeVos snidely claimed last year that under the Obama regulation “all one had to do was raise his or her hands to be entitled to so-called free money.” But in fact, under the Obama rule, a student still had to prove, or show government findings of, school misconduct.

So for the owners who believe their schools are honest and effective, here's how you would have avoided trouble under the Obama borrower defense rule: Be honest and effective. Don't set out to deceive or defraud students. Train your recruiters to behave ethically. Offer a quality education -- one that will actually help a students build careers -- at a fair price.

Look at the facts. Since the Department of Education started taking the borrower defense law seriously in the wake of the collapses of for-profits Corinthian Colleges and ITT Tech, it has received some 99,000 student complaints. 98.6 percent of them are from students who attended for-profit colleges. There are very few from non-profit and public colleges. There also are plenty of for-profit schools where not a single student has filed for debt forgiveness. Students who attended good schools, it seems, are not seeking loan relief.

Negotiator Will Hubbard of Student Veterans of America said he has seen little evidence of students committing fraud, but much evidence of for-profit schools committing fraud, and that was why the Obama Administration issued its borrower rule.

Under the Obama rule, if a few students at a good school managed nevertheless to get their loans forgiven by showing school misconduct, taxpayers, not the school, would, initially, be on the hook for the money.  Only if the Department saw a pattern of wrongdoing would it be likely to come after the school.

In that light, it seems clear that the Obama borrower defense rule is not a lucrative scam for crooked students at honest schools. Instead, it's protection for honest students at crooked schools.

When the discussion moved on, NCLC lawyer Shafroth objected to another enormous barrier that the DeVos rule sets up: A student can rely on a state court judgment to get loan relief only if it's not a default or consent judgement, and only if it's a judgment that the student herself obtained. That would prevent a student from relying on the fact that her school settled her claim for cash, or that her school was in bankruptcy and didn't contest her claim, or that her state's attorney general obtained a multi-million dollar judgment against the school. These are common ways that claims against schools are resolved, yet they would count for nothing under the DeVos rule. But industry lawyer Lacey insisted that any other formulation would be unfair to schools.

It appears that the drafters of the DeVos rule decided to include every conceivable obstacle to students recovering. Perhaps they thought they would make a better record for a subsequent court challenge if the Department could claim to have listened to students by eliminating some of the barriers before issuing a final rule. Or perhaps they calculate that if a court struck down some of the barriers, enough would survive to still render student rights, and the 1994 debt relief law, a nullity.

As pro-student negotiators continued to expose flaws in the rule by pointing out its failures to protect students from predatory college abuses, some of the school representatives got indignant, claiming that the pro-student representatives were vilifying all for-profit schools, when their own schools were good and honest. This was an extraordinary position for several reasons. First, the pro-student negotiators had not condemned all for-profit schools, just specific egregious practices. Second, in last year's borrower defense rule meetings under the Obama administration, and in this year's gainful employment meetings under Trump, industry representatives have prevailed upon Department officials to warn negotiators not to single out specific schools for criticism -- an absurd position, given the need to use illustrations to back up arguments. Third, the owners are singling out their own schools for praise, sometimes effusive praise. Finally, the owners who claim their industry is being vilified are the same ones who repeatedly claim that a strong rule will allow student scam artists to thrive; they are vilifying their own students.

Addressing yet another barrier to student relief in the DeVos rule, Bridgepoint / Ashford lawyer Linda Rawles said it would be "rare" for a college to enroll a mentally disabled or incapacitated student. That's really wrong when it comes to for-profit colleges. Here are a few examples: (1) Corinthian Colleges; (2) Bridgepoint / Ashford.

Linda Rawles and Aaron Lacey -- the lawyers tied to big predatory schools -- are dominating the conversation for the industry side, commenting on nearly every point, while some other for-profit college negotiators say less. They also are asserting their will physically. Rawles is actually an alternate, rather than primary, negotiator. But while other alternates sit directly behind their primary negotiators, Rawles has carved out a spot at the table and eased her chair to just inches from it, next to the primary negotiator she was supposed to back up. Rawles' presence at the table has essentially displaced Lacey, who has gradually moved his chair to the head of the table and now the center of the head of the table, alongside the negotiators representing the Department of Education, who normally monopolize that side. Lacey's seizure of the Department's table territory, and Rawles' self-promotion to the table, are a reflection of the DeVos Department's proposed rule, which would give Lacey's clients, and Rawles' clients, everything they want.

This article also appears on Republic Report.

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