Folks are disgusted with Donald Trump’s “University” that lured students – “with tantalizing promises of riches,” according to the New York Times – into taking on huge amounts of debt to earn real estate degrees that were “basically worthless,” according to an analysis in Time magazine.
The sordid story has, according to the Times reporter, “taken on surprising potency” in the Republican presidential campaign Trump dominates.
For sure, Trump U is bad, but it’s also the byproduct of a higher education system that has been turned into a high-stakes gamble for individual Americans.
Since the Great Recession, federal and state authorities have been disinvesting from their obligations to pay for education. So now, nearly every state spends less on higher education than it did in 2007. Federal government expenditures on education are also in decline.
As a result of the disinvestment, nearly every state has shifted the cost of college to students. Yet, the same politicians who cut financial support for education endlessly exhort Americans to view education as “the key” to achieving individual prosperity.
So with public funding shortened, individuals have been borrowing money at historic levels to pay the expenses. Reports of new graduates with enormous debt loads – and even senior citizens staving off bankruptcies caused by college debts – are now commonplace.
Turning higher education into a high-stakes gamble propped up with historic levels of individual debt has increased the chance of hucksters like Trump to ply their trade. But his scheme to swindle well-intentioned students is really a deft attempt at stretching the limits of a game whose rules and goals need to be challenged.
Someone is taking on that challenge, at least in one place where the rules of the college student debt game have been made.
Last week, Education Week reported Massachusetts Sen. Elizabeth Warren called out the U.S. Department of Education for a significant part of its role in being complicit with student college loan debt rigging. Specifically, Warren sent a “blistering letter,” according to the EdWeek reporter, to the acting department head accusing the department of “not having a proper handle on student loan contractors.”
Warren pointed in particular to the relationship the department has with Navient, formerly known as Sallie Mae. In her letter, she notes Navient had to settle in a suit brought by the DOE for its role in “cheating tens of thousands of active duty service members by overcharging them on their student loans while they were on deployment serving their country.” Despite its crimes, she notes, “Navient has continued to service millions of federal student loans.”
Warren states, “The Department has done nothing but generate excuses for why it will not act to hold Navient accountable, and has put no serious effort into trying to remedy – or even identify – this problem to the extent it occurred across student loan servicers during the time period in question.”
According to EdWeek, “Warren not only wants the department to reassess its position with Navient, but wants to know why the company hasn’t been penalized further.”
Warren’s accusations are the latest salvo in her continuing campaign to change the way the federal government governs student loans. In July 2015, according to the New York Times, she accused DOE of “a lack of transparency and failure to protect students from dangerous student loan servicers and for-profit colleges.”
Speaking before the American Federation of Teachers, she “pointed to the case of Corinthian Colleges, a for-profit company that filed for bankruptcy in May, leaving tens of thousands saddled with debt … She said that the department should have acted earlier and gone further in holding the company’s executives responsible.”
Any steps the Obama administration took in 2015 to correct the bad practices of for-profit colleges and to warn students about the dangers of taking on large college loan debts have fallen short of addressing the gravy train. As the Times reports, “The Department of Education continues to hand over tens of millions of dollars every month to other for-profit schools that have been accused of predatory behavior, substandard practices or illegal activity by its own officials or state attorneys general across the country.”
As Janet Lorin reports for Bloomberg Business, as a result of all this student debt, DOE is now one of the largest financial institutions in the country. “If it were a bank, it would rank fifth in the U.S. in assets,” she writes.
This mountain of college debt, a record $115 billion of federal loans, provides a “stream of revenue to companies at every stage of the process” – not just corrupt for-profits, but also debt servicers, collection agencies and others.
So student debt is very much big business, and business is very good. “When private companies can’t recover the money,” Lorin notes, “the Treasury Department garnishes Social Security, tax refunds, or wages.”
Much in the same way the extremism Trump represents politically is really just a manifestation of what’s always been true about modern conservatism, Trump U is just a byproduct of the bigger higher ed crapshoot that needs to come down.
Warren seems to be one of the few in Washington D.C. willing to take on business as usual. Her most recent action to call for a full accounting of Navient and its corrupt practices addresses just one actor. But it’s an important step in her determined campaign to take on the whole rotten system.
If you support what Warren is doing, the folks at CREDO have a petition to support her request that the DOE “come clean” about the dirty money game being played with college student loans.