Trump Education Official (And Former For-Profit College Lobbyist) Buries 158,000 Claims From Defrauded Student Borrowers

May 24, 2019

WASHINGTON, D.C. — This week, Trump Education Department official Diane Auer Jones testified before a congressional subcommittee that the administration has no timetable for addressing the nearly 160,000 backlogged borrower defense claims. “Borrower Defense to Repayment” isan Obama-era protection that provides a path to debt forgiveness for students who were defrauded by their colleges, often for-profit institutions. Consumer watchdog group Allied Progress called this willful failure to follow the law and aid cheated borrowers the natural result of President Trump putting a former for-profit college industry lobbyist in charge of U.S higher education regulations.

“Who could have foreseen that tapping a for-profit college insider to help oversee the nation’s higher education system would result in industry scammers getting away with ripping off student borrowers,”said Jeremy Funk, spokesman for Allied Progress. “Betsy DeVos may dodge her taxes, but even she can’t duck the blame on borrower defense. Either DeVos and her team are too incompetent to carry out their basic duty of aiding student borrowers who’ve been cheated, or they’re sweeping these abuses under the rug to protect profits of their industry friends. Students deserve better.”

At the hearing Congresswoman Ayanna Pressley (D-MA) cut through Jones’ excuse that a California court ruling is keeping her from doing her job, noting that: “Nothing in this order prohibits the Secretary from fully discharging the loans of any borrower who has successfully completed, or who successfully completes, an attestation form,” adding that “the court case does not apply to all borrowers.”

Jones’ justification for burying borrower defense claims is more pathetic when considering the court case in question involves the Trump administration’s 2017 revised formula for calculating “relief” which stipulates some defrauded borrowers should only get “partial relief” (another win for the for-profit college industry). In effect, Trump’s Education Department tried to shortchange swindled students and now they’re blaming the court for not letting them do so.

WHAT YOU NEED TO KNOW:

Diane Auer Jones Was Unable To Give Congress A Timeline For Processing Over 158,000 Outstanding Borrower Defense Claims.

In May 2019, Diane Auer Jones Told A House Oversight Subcommittee That “She Could Offer No Timeline For The Review Of More Than 158,000 Outstanding Borrower-Defense Claims.” “A top Education Department official said Wednesday that she could offer no timeline for the review of more than 158,000 outstanding borrower-defense claims. Diane Auer Jones, the department’s principal deputy under secretary, said at a House oversight subcommittee hearing that the Trump administration hasn’t taken any action on the claims in close to a year because a federal judge in California blocked the use of a formula for awarding partial relief of loan forgiveness rolled out in 2017. ‘We are not able to determine the level of harm or level of relief a borrower should get because the methodology we have used is being blocked by a California court,’ she said.” [Andrew Kreighbaum, “Trump Official Says No Timeline for Review of Borrower-Defense Claims,” Inside Higher Ed, 05/23/19]

The Borrower Defense Rule Provides A Path To Debt Forgiveness For Students Who Were Defrauded By Their Colleges, Often For-Profit Institutions.

Borrower Defense To Repayment Is An “Obama-Era Rule” That “Allows Students Who Believe They Were Defrauded By Their College To Apply For Loan Forgiveness.” “The Obama-era rule, known as Borrower Defense to Repayment, allows students who believe they were defrauded by their college to apply for loan forgiveness. The idea is that if they didn’t get the education they were promised, they shouldn’t have to pay back their debt. The number of these applications soared as the Obama administration cracked down on for-profit colleges. Sometimes nursing students, for example, found out after finishing their program that it didn’t have the right accreditation — keeping them from getting a job.” [Katie Lobosco, “Trump rollbacks leave more than 100,000 people waiting on student loan relief,”CNN, 03/26/19]

• The Majority Of Borrower Defense Claims Are Filed Against For-Profit Colleges. “As of last fall, more than 200,000 people had applied for loan forgiveness, a majority of whom went to for-profit colleges. Nearly 48,000 received debt relief and 9,000 have been denied.” [Katie Lobosco, “Trump rollbacks leave more than 100,000 people waiting on student loan relief,”CNN, 03/26/19]

For Nearly Five Years, Diane Auer Jones Was A Chief Lobbyist For Career Education Corporation, Which Drew Scrutiny From The Senate, FTC, SEC, And 22 Attorneys General For “Misleading And Deceptive Recruiting Tactics.”

From 2010 To 2015, Diane Auer Jones Worked On “Regulatory Operations” And “Government Affairs” As An Executive At Career Education Corporation. Diane Auer Jones was “SVP and Chief External Affairs Officer” of Career Education Corporation from October 2010 to March 2015. She said she, “[s]erved as the senior executive responsible for company-wide regulatory operations, licensure and accreditation, corporate communications, public relations, government affairs and centralized academic services.” [LinkedIn Profile for Diane Jones, accessed 05/23/18]

During Jones’ Tenure At CEC, A Senate HELP Committee Report Noted There Were “Allegations of Misleading And Deceptive” Recruiting Practices Against CEC. “The company appears to offer little in the way of student support services, and has struggled to address allegations of misleading and deceptive recruiting tactics as well as misrepresentations in its job placement rates.” [“Career Education Corporation,” U.S. Senate Committee on Health, Education, Labor, and Pensions, accessed 10/11/18 and “FOR PROFIT HIGHER EDUCATION: The Failure to Safeguard the Federal Investment and Ensure Student Success,” U.S. Senate Committee on Health, Education, Labor, and Pensions, 07/30/12]

Career Education Corporation Has Been Investigated By The FTC, SEC, And Twenty-Two Attorneys General. “In recent years the company has been under investigation for deceptive practices by the Federal Trade Commission; the Securities and Exchange Commission; and the attorneys general of Arkansas, Arizona, Connecticut, Idaho, Iowa, Kentucky, Missouri, Nebraska, North Carolina, Oregon, Pennsylvania, Washington, Illinois, Tennessee, Hawaii, New Mexico, Maryland, Florida, Massachusetts, Minnesota, New York, and the District of Columbia.” [David Halperin, “Another For-Profit College Lobbyist To Join DeVos Education Department,” Republic Report,03/06/18]

In 2013 Career Education Corporation Had To Pay $9.25 Million In Restitution And A $1 Million Penalty For Having “Significantly Inflated Its Graduates’ Job Placement Rates.” “Attorney General Eric T. Schneiderman today announced a $10.25 million settlement with Career Education Corporation (‘CEC’), a for-profit education company. The settlement resolves an investigation that revealed that in disclosures made to students, accreditors, and New York State, CEC significantly inflated its graduates’ job placement rates. CEC will pay $9.25 million in restitution to students, a $1 million penalty, and has agreed to substantial changes in how the company calculates and verifies placement rates.” [Press Release, New York State Office of the Attorney General, 08/19/13]

In 2011 Career Education Corporation Settled A $40 Million Class Action Lawsuit For Claiming Its Job Placement Rate Was 97% Without Noting That A “‘Substantial Majority’“ Of The Jobs Paid Less Than $12 An Hour And Were Largely Entry-Level. “In 2011, CEC agreed to pay $40 million to settle a class action lawsuit involving another of one its subsidiaries, the California Culinary Academy in San Francisco. In that case, former students allege that the college’s admissions representatives and catalog boasted a job placement rate of 97 percent, but that the college did not tell applicants that the statistics included graduates working as baristas, prep cooks, line cooks and waiters, jobs for which no degree was necessary. The complaint also contends that wages for a ‘substantial majority’ of the jobs included in the statistics paid $12 an hour or less.” [“Career Education Corporation,” U.S. Senate Committee on Health, Education, Labor, and Pensions, accessed 10/11/18]

Diane Auer Jones Is Focusing On Loosening Oversight Of Accreditors, Giving Them A “Safe Space,” Having Them “Tolerate Some Risk,” And Arguing That They And Other Regulators Should “Stay In Their Lanes.”

Under Diane Auer Jones And Betsy DeVos, ED’s Higher Education Policy Is “A Stark Contrast To The Obama Administration’s […] Tougher Scrutiny Of Accreditors.”“The broad plan from Education Secretary Betsy DeVos to ‘rethink’ higher education is a stark contrast to the Obama administration’s approach, which made a signature policy of tougher scrutiny of accreditors, often citing oversight failures involving low-performing for-profit colleges. ‘Accreditation is right at the crux of almost everything you do in higher ed,’ Jones said last week. ‘We’re looking at every aspect of accreditation and saying, ‘Does this make sense?’“ [Andrew Kreighbaum, “DeVos to Announce New Push for Deregulation, Innovation,” Inside Higher Ed, 07/30/18]

Diane Auer Jones “Said The [Trump] Administration’s Goal Is To Reduce Compliance Requirements For Accreditors.”“Diane Auer Jones, the department’s principal deputy under secretary, delegated to perform the duties of under secretary and assistant secretary for postsecondary education, said the administration’s goal is to reduce compliance requirements for accreditors, freeing them up to focus on educational quality while more clearly defining the college oversight roles of those agencies, state governments and federal regulators.” [Andrew Kreighbaum, “DeVos to Announce New Push for Deregulation, Innovation,” Inside Higher Ed, 07/30/18]

Jones Is Working To Have Accreditors “Tolerate Some Risk” To More Easily Grant Title IV Funding To Schools.“Jones said DeVos wants to allow accreditors to ‘tolerate some risk.’ For example, she said, the administration is interested in encouraging colleges to offer degrees through new online models at more affordable prices. The federal government outsources much of its gatekeeping role for student aid to accreditors. Without their approval, colleges and universities can’t maintain their access to Title IV federal funds.” [Andrew Kreighbaum, “DeVos to Announce New Push for Deregulation, Innovation,” Inside Higher Ed, 07/30/18]

Jones Has Argued That Accreditors, Federal Regulators, And State Regulators Should “Stay In Their Lanes,” And That Accreditors Should Not Have Oversight Of For-Profits Converting To Nonprofits.“Part of the administration’s goal with the accreditation overhaul, Jones said, is to better define oversight roles and to ensure that accreditors and state and federal regulators ‘stay in their lanes,’ focusing on their core strengths.”

• “For example, she said, accreditors tend to be ill suited to properly scrutinizing the financial health of colleges or the specifics of complex financial interactions, including the wave of large for-profits that are seeking to convert to nonprofits. Those jobs are best left to the feds and state regulators, she said. “Their expertise is not in evaluating contract terms,” Jones said of accreditors. “The role of the accreditor is to make sure the institution is well run.” [Andrew Kreighbaum, “DeVos to Announce New Push for Deregulation, Innovation,” Inside Higher Ed, 07/30/18]

Jones Said, “The Credit Hour Probably Interferes With Innovation Almost More Than Anything” While Issuing A “Controversial Proposal” To Undo Obama-Era Rules To Hold Accreditors More Accountable For Overseeing Credit Hours.  “‘The credit hour probably interferes with innovation almost more than anything,’ she said. ‘I think most educators believe we should go back to the way we did it for 100 years where institutions determine what the credit hour should be and justify it to their accreditor.’“ [Andrew Kreighbaum, “DeVos to Announce New Push for Deregulation, Innovation,” Inside Higher Ed, 07/30/18]

• Diane Auer Jones Described Plans To Drop The Obama Administration’s “Standardized Definition For Academic Coursework.”“In what will be the one of the most controversial proposals, [Jones] said the department wants to drop a standardized definition for academic course work, known as the credit hour, that the Obama administration rewrote in 2010 to curb credit inflation.” [Andrew Kreighbaum, “DeVos to Announce New Push for Deregulation, Innovation,” Inside Higher Ed, 07/30/18]
• “The Obama administration issued the credit-hour definition in 2010 after the inspector general found that colleges had inflated the value of credits to get more federal student aid.” [Andrew Kreighbaum, “DeVos to Announce New Push for Deregulation, Innovation,” Inside Higher Ed, 07/30/18]

Jones Argued In 2018 That “We Have To Give Accreditors A Safe Space To Support That Innovation. “‘We have seen some accreditors that want to be bold. Too many times they’ve done it with the department’s blessing and have gotten blindsided after the fact,’ said Jones, a former assistant secretary of education in the George W. Bush administration. […] ‘If we really want innovation to take place, we have to give accreditors a safe space to support that innovation.’“ [Andrew Kreighbaum, “DeVos to Announce New Push for Deregulation, Innovation,” Inside Higher Ed, 07/30/18]

• However, in 2009, Jones Criticized A “Funding Model In Education That Favors Constant Change And Innovation.” [Carol Iannone, “Old Ills, New Remedies: A Conversation with Diane Auer Jones,” National Association of Scholars, 06/29/09]

Although Diane Auer Jones Acknowledged That Some Lenders “Behaved Badly,” She Defended Them, Claiming That They Have “Have Benefited Thousands If Not Millions Of Students.” “We must also acknowledge that while some FFEL lenders have behaved badly and all have enjoyed generous government guarantees for the non-secured loans they make, they have enabled millions of low- and middle-income individuals to attend college. These lenders have also achieved dramatic reductions in borrower default rates due to improved consumer counseling and customer service. In addition, many have used their profits to establish scholarship and college-readiness programs, which have benefited thousands if not millions of students.” [Carol Iannone, “Old Ills, New Remedies: A Conversation with Diane Auer Jones,” National Association of Scholars, 06/29/09]

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