DeVos Lieutenant Heads Back Through Revolving Door to Lobby On Behalf of For-Profit Colleges and Loan Servicers

June 14, 2019

Washington D.C. (June 13th, 2019) — In response to reports that James Manning, acting Under Secretary of the DeVos Education Department, is departing for a lobbying gig at Penn Hill Group, which as of 2019, has been registered to lobby for National Council of Higher Education, “the nation’s oldest and largest higher education finance trade association” whose membership includes “for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies”, Allied Progress spokesman Jeremy Funk made the following statement:

“The for-profit and servicer industries have never had this much influence over federal regulators. Look no further than the sheer volume of industry lobbyists revolving in and out of Betsy DeVos’ Education Department.”

BACKGROUND:

FSA Head James Manning: Back Through The Revolving Door

Prior to Working At The Trump Education Department, FSA Head James Manning Was A Consultant For The Largest Student Loan Guarantor In The Country.

COO James Manning Recently Consulted For The Biggest Student Loan Guarantor

FSA COO James Manning Has Consulted For USA Funds, Once “The Nation’s Largest Student Loan Guarantor, From 2015 To 2017.” “The financial disclosures of Acting Under Secretary of Education James Manning show he previously consulted for USA Funds, an organization that was once the nation’s largest student loan guarantor.” Derek Kravitz et. al, “Here Are the Financial Disclosures of Hundreds of Officials Trump Has Installed Across the Government,” ProPublica, 08/03/17]

During Manning’s Tenure, USA Funds Fought Federal Fee Limitations…. Mere Months After Manning Joined Betsy Devos’ ED, Those Fee Limitations Were Struck Down.

While Manning Consulted For USA Funds, It Fought Against ED Fee Limitations; Two Months After He Joined ED, The Limitations Were Rescinded. “In 2015, USA Funds sued the Education Department after the government instituted a rule limiting some fees guaranty agencies charge struggling borrowers. In March, two months after Manning joined the administration, the department rescinded the rule. USA Funds, which recently changed its name to Strada Education Network, dropped the case less than a week later.” [Derek Kravitz et. al, “Here Are the Financial Disclosures of Hundreds of Officials Trump Has Installed Across the Government,” ProPublica, 08/03/17]

• “Manning received $110,000 from USA Funds for consulting on issues related to the federal student loan program and higher education data analytics, according to his disclosure form. The form doesn’t say when Manning worked with the organization, but it shows he was a consultant from January 2015 to January 2017.” [Derek Kravitz et. al, “Here Are the Financial Disclosures of Hundreds of Officials Trump Has Installed Across the Government,”ProPublica, 08/03/17]

• Despite The Fee Limitations Being Revoked, An ED Spokesperson Claimed That Manning Had Recused Himself From Matters He Previously Consulted On. “A department spokeswoman told ProPublica that Manning had recused himself from all matters involving his old employer. ‘Jim has not been involved in any discussions or decisions made at the department that have or will effect that company,’ said spokeswoman Elizabeth Hill, adding that Manning ‘is a tremendous asset to the department.'” [Derek Kravitz et. al, “Here Are the Financial Disclosures of Hundreds of Officials Trump Has Installed Across the Government,”ProPublica, 08/03/17]

Separately, Several US Senators Raised Questions About Manning’s Relationship With William Hansen, Head Of USA Funds And Its Successor, The Strada Education Network.

Senators Cortez Masto, Warren, Durbin, And Harris Wrote A Letter To ED’s Ethics Official About Manning’s Potential Conflicts of Interest And His Long-Standing Relationship To USA Fund’s President And CEO. On March 23, 2018, “U.S. Senator Catherine Cortez Masto (D-Nev.) led her colleagues in sending a letter to U.S. Department of Education (DOE) Ethics Official Marcella Goodridge-Keiller, raising concerns over James “Jim” Manning’s potential conflicts of interest due to concurrently serving roles as DOE Acting Under Secretary and the Acting Chief Operating Officer of Federal Student Aid. Because Manning is effectively in charge of all major policy and operations governing student loans, grants, campus-based aid, institutional oversight, and loan servicing, conflicts of interest in this unprecedented expansive role present a significant risk to students and taxpayers.” [Press Release, Sen. Cortez Masto, 03/23/18]

• “The senators expressed concerns specifically about his professional relationship with William Hansen, who leads both USA Funds and Strada Education Network, and is a board member of Performant Financial Corporation.” [Press Release, Sen. Cortez Masto, 03/23/18]

• The Senators Also Noted That Manning Is Not Bound To An Executive Branch Ethics Pledge. “‘Because Mr. Manning is a member of the senior executive service, it is also our understanding that he is not subject to, and has not signed, the Trump ethics pledge, Executive Order 13770, Ethics Commitments by Executive Branch Employees,’ wrote the senators. ‘Therefore, we are writing to better understand how Mr. Manning and the Department have addressed potentially significant conflicts of interest that appear to exist in his current roles.'” [Press Release, Sen. Cortez Masto, 03/23/18]

FSA Is Required To Publish Its COO’s Annual Performance Agreement. The Last Agreement Was Published In FY 2015.The annual performance agreement of the Federal Student Aid Chief Operating Officer is published in compliance with its enabling legislation at 20 U.S. C. § 1018 (d) (4) (B). [“Strategic Planning and Reporting,” Office of Federal Student Aid, accessed 10/09/18]

• The last available COO performance report was from FY 2015. [“Strategic Planning and Reporting,” Office of Federal Student Aid, accessed 10/09/18]

During His Time With FSA, James Manning Oversaw Massive Problems With The Public Service Loan Forgiveness Program… Problems That Seemed To Help Loan Servicers’ Bottom Line.

After The GAO Found That FSA Approved Less Than 1% Of Public Service Loan Forgiveness Applicants, James Manning “Offered No Timeline” For Addressing The Problem

In September 2018 The Government Accountability Office Found That FSA Rejected More Than 99% Of Those Who Applied For Student Loan Forgiveness Program. “A program intended to wipe away the student loans of qualifying public servants has rejected more than 99 percent of those who applied, according to a government audit that found that ‘fragmented’ management and ‘piecemeal’ operating instructions had contributed to the failure to forgive more debt. […] the Government Accountability Office said major administrative failings had left both the program’s administrator and borrowers in a state of confusion about the program’s rules.” [Stacy Cowley, “28,000 Public Servants Sought Student Loan Forgiveness. 96 Got It.,” The New York Times, 09/27/18]

Of 28,000 Borrowers, Only 96 Had Their Student Debt Forgiven After 10 Years Of Public Service And Paying Their Debts. “The Education Department said last week that 28,000 borrowers had submitted applications to have their debts canceled since the public service loan forgiveness program began accepting them a year ago. Only 96 were approved, the agency said. More than 70 percent were rejected for not meeting the eligibility requirements. Most of the rest had left necessary information out of their applications.” [Stacy Cowley, “28,000 Public Servants Sought Student Loan Forgiveness. 96 Got It.,” The New York Times, 09/27/18]

• “To get their remaining balances forgiven, applicants must spend at least a decade working for government agencies or certain types of nonprofit organizations; they also must make 120 qualifying monthly payments on their federal student loans.” [Stacy Cowley, “28,000 Public Servants Sought Student Loan Forgiveness. 96 Got It.,”The New York Times, 09/27/18]

James Manning Acknowledged The GAO Report, But “Offered No Timeline” For Taking Action On Its Recommendations. “In a written response that was included in the report, James F. Manning, the acting head of the Education Department’s Federal Student Aid office, said the agency agreed with many of report’s recommendations, but offered no timeline for carrying them out.” [Stacy Cowley, “28,000 Public Servants Sought Student Loan Forgiveness. 96 Got It.,” The New York Times, 09/27/18]

Student Loan Servicer Nelnet Sees “Forgiveness” As A Threat To Their Bottom Line.

In Its 2018 Annual Report, Nelnet Identified “Prepayment Risk,” Claiming That, If The Federal Government Initiates “Additional Loan Forgiveness” Plans, “Such Initiatives Could Further Increase Prepayments And Reduce Interest Income, And Could Also Reduce Servicing Fees.” “Legislative risk exists as Congress evaluates proposals to reauthorize the Higher Education Act. If the federal government and the Department initiate additional loan forgiveness, other repayment options or plans, or consolidation loan programs, such initiatives could further increase prepayments and reduce interest income, and could also reduce servicing fees.” [Nelnet Inc. Annual Report (Form 10-K), Securities and Exchange Commission, 02/27/18]

While Navient Has Been Accused Of Systematically Steering Qualified Borrowers Away From Loan Forgiveness To Avoid Losing Business

In October 2018, The American Federation Of Teachers Brought A Lawsuit Against Navient Alleging That It Deceived Steered Borrowers Away From Public Service Loan Forgiveness. “Members of the American Federation of Teachers, the second-largest teachers union in the United States, announced on Wednesday a lawsuit against student loan servicer Navient, alleging the company deceived borrowers and prevented them from accessing debt relief. […] The union members allege that Navient, one of the largest administrators of federal student loans, failed to inform borrowers of public service loan forgiveness, misled people into believing they were on track for the forgiveness, and even steered potentially eligible borrowers away from the consumer protection. The suit was filed in U.S. District Court for the Southern District of New York.” [Annie Nova, “Members of a teachers union just sued one of the largest U.S. student loan servicers, saying the company deceived borrowers,”CNBC, 10/03/18]

•     It Is “Not Always In The Financial Interest Of Lenders Such As Navient To Help Borrowers Into The Debt Relief Program” Because “Because They Then Lose The Business To Fedloan,” Which Administers PSLF. “‘Most teachers should qualify for public service loan forgiveness,’ said Mark Kantrowitz, founder of FinAid. However it’s not always in the financial interest of lenders such as Navient to help borrowers into the debt relief program, he said, because they then lose the business to FedLoan, the company that administers the public service loan forgiveness program for the government.” [Annie Nova, “Members of a teachers union just sued one of the largest U.S. student loan servicers, saying the company deceived borrowers,”CNBC, 10/03/18]

Manning Is Now Taking A Job With A Lobbying Firm That Represents For-Profit Colleges, Loan Servicers and Others

Penn Hill Group Represents NCHER, A Trade Association For Education Industry Entities Including For-Profit Colleges, Lenders And Loan Servicers.

In June 2019, Penn Hill Group, An Education Lobbying Firm, Announced Jim Manning Was Joining The Firm As A Senior Advisor. “Penn Hill Group today announced James F. Manning a leader in education management, operations and policy, will join the firm as Senior Advisor.” [Press Release, “EDUCATION VETERAN JAMES F. MANNING JOINS PENN HILL GROUP,” Penn Hill Group, 06/13/19]

•       “[Penn Hill Group’s] lobbying and government relations services help turn your policy agenda into guidance, regulation, bills or laws.” [“LOBBYING AND GOVERNMENT RELATIONS,” Penn Hill Group, accessed 06/13/19]

As Of 2019 Q1, Penn Hill Group Represented The National Council Of Higher Education Resources (NCHER). [“2019 Q1 Lobbying Report,” Penn Hill Group, accessed 06/13/19]

•       NCHER Has A Variety Of Education Entities As Members Including “For-Profit Higher Education,” “Lenders,” “Servicers” And Others. “The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success.” [“About Us,” National Council of Higher Education Resources, accessed 06/13/19]
•       In Recent Years, NCHER Has Advocated For Federal Pre-Emption Of State And Local Efforts To Regulate Loan Servicers. “The National Council of Higher Education Resources (NCHER) urges the Department to issue regulatory guidance that clearly states that federal student loan servicers and guaranty agencies are governed by the Department’s rules and requirements and those of other federal agencies, and preempt state and local laws and actions that purport to regulate the activities of participants in the federal student loan programs, including federal contractors.” [“Letter to Kathleen Smith,” NCHER, 07/17/17]

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