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Friday, April 18, 2025

The Haves and Have Nots of Higher Education and Student Loan Debt

In a move that has raised eyebrows across Washington and beyond, President Donald Trump recently announced a plan to transfer the U.S. Department of Education’s vast student loan portfolio—totaling a staggering $1.8 trillion—to the Small Business Administration (SBA). This bold step is ostensibly designed to streamline the management of federal student loans, but it is also seen by many as the first move in a larger effort to dismantle the Department of Education entirely, reduce federal oversight, and privatize key aspects of the student loan system. Alongside this plan, there are growing discussions about eliminating essential borrower protections, including programs like Public Service Loan Forgiveness (PSLF), Pay As You Earn (PAYE), Income-Contingent Repayment (ICR), and the Borrower Defense to Repayment program, all of which have offered critical relief to millions of students. Additionally, the rollback of Gainful Employment regulations—which were designed to protect students from predatory for-profit institutions—further signals a shift toward private sector control, which has historically benefited lenders over borrowers.

The Alleged 'Rescue' of the Loan Portfolio

The White House has framed the transfer of the student loan portfolio to the SBA as a necessary step to relieve the Department of Education (ED) of a heavy burden, positioning the SBA as the new “caretaker” of the nation’s student debt. According to President Trump, the SBA—under the leadership of Kelly Loeffler—will now handle the $1.8 trillion student loan portfolio, while the Department of Education focuses on other key educational initiatives.

For some, the move seems like a fresh approach to a problem that has long plagued U.S. higher education: the overwhelming student debt crisis. However, a deeper look into the mechanics of the transfer suggests that this could be the first step toward a far more troubling goal: the dismantling of the federal student loan system and the privatization of debt, a shift that could harm millions of consumers in the process.

The SBA’s Inexperience with Student Loans

The SBA, traditionally tasked with managing small business loans, lacks the expertise to effectively manage the complex structure of federal student loans, which include income-driven repayment plans, loan forgiveness programs, and various protections for struggling borrowers. With the agency also facing significant staffing cuts, it’s highly unlikely that the SBA will be able to competently handle such a vast and complicated portfolio—especially when 40% of these loans are already in default or behind on payments.

This raises an obvious question: is the SBA being set up to fail? Some insiders suggest that the failure of the SBA to properly manage the student loan portfolio could be deliberate—creating a crisis that would justify selling off the portfolio to private companies, thus privatizing the entire system.

The Planned Failure: A Strategy for Privatization?

According to several former senior officials within the Department of Education, the transfer of the student loan portfolio to the SBA could be a calculated move to destabilize the federal loan system. The apparent failure of the SBA to manage the loans would then serve as a justification for transferring the loans to the private sector. This mirrors tactics used in other sectors where privatization was pursued under the guise of government inefficiency. The fear is that this move could ultimately lead to for-profit companies taking over the loan system, with borrowers facing higher interest rates, stricter repayment terms, and the loss of essential protections.

Who Stands to Gain from Privatizing Student Loans?

The shift toward privatizing student loans stands to benefit several key players in the financial and educational sectors, particularly for-profit companies and private lenders who have long pushed for deregulation and profit-driven management of student debt. The primary beneficiaries would include:

Private Lenders and Financial Institutions: Banks, investment firms, and loan servicing companies are the most obvious winners in a privatized student loan system. With the federal government stepping back, these entities would gain control over the $1.8 trillion portfolio, allowing them to set higher interest rates, stricter repayment terms, and impose fees on borrowers. This would turn student loans into even more lucrative financial products for the private sector.
For-Profit Educational Institutions: For-profit colleges, which often rely on student loans to fund their operations, could also stand to gain. These institutions—many of which have faced significant scrutiny for high tuition costs and poor student outcomes—would benefit from a less regulated environment. Without the Gainful Employment regulations, which were designed to hold these institutions accountable for their job placement and earnings data, they would face fewer restrictions on their recruitment practices and financial dealings, potentially allowing them to continue enrolling students in expensive, low-quality programs.
Servicers and Debt Collection Agencies: Loan servicers and debt collection agencies that would likely take over the management of student loans in a privatized system stand to profit greatly. By controlling the servicing of student loans, these companies can increase their fees and aggressively pursue defaulting borrowers, further exacerbating the financial hardship for many students. These entities would benefit from a less regulated environment where the focus would shift toward profitability, often at the expense of borrowers.
Political Donors and Lobbyists: Financial institutions and for-profit education providers have historically been major political donors and lobbyists, particularly to policymakers who have pushed for deregulation of student loan systems. Privatization could provide these stakeholders with the opportunity to consolidate their power over the student loan industry, influencing policy decisions in their favor and ensuring continued access to profits from the student loan market.

A History of Struggles: Lack of Oversight and Privatization Since the 1980s

The idea of privatizing student loans and dismantling federal oversight is not entirely new. In fact, the U.S. student loan system has been struggling for decades due to a lack of oversight and a trend toward privatization dating back to the 1980s. The federal government’s role as a guarantor of student loans—starting with the creation of the Guaranteed Student Loan (GSL) program in the 1960s—was eventually scaled back, leading to a rise in private student loans. As private lenders entered the student loan market, particularly during the 1990s and 2000s, the system became increasingly unregulated, leading to rising debt levels and predatory lending practices.

By the 1980s, the federal government’s reliance on private institutions to handle student loans led to a lack of transparency, accountability, and consumer protections. In particular, private lenders began to offer loans with fewer safeguards, contributing to the explosion of student loan debt and the proliferation of for-profit colleges that preyed on vulnerable students. The government, despite its involvement, increasingly stepped back from actively managing the loan system, leaving students with limited options for relief when they fell into financial distress.

The Consequences of Deregulation: Elite Colleges and the Growing Educated Underclass

One of the most significant byproducts of the shift toward privatization and deregulation in U.S. higher education has been the growth of a growing educated underclass. While elite colleges have continued to thrive, expanding their endowments and increasing their tuition fees, a large segment of the population is left with a degree and overwhelming debt that fails to deliver on its promise. Over the past several decades, prestigious universities have only gotten wealthier, with many now sitting on endowments of billions of dollars. These institutions benefit from the student loan system, which allows students to take on more debt to afford high tuition costs, all while their wealthy alumni networks and expansive endowments only grow larger.

At the same time, a growing number of students from lower-income backgrounds—many of whom attend for-profit or underfunded public colleges—are graduating with significant debt and few prospects for stable, high-paying careers. This has created a growing “educated underclass,” where graduates with degrees struggle to find employment that pays enough to manage their loan repayment, further exacerbating wealth inequality.

The Dangers of Future Issues: AI, Automation, and the Loss of Good Jobs

Looking to the future, the privatization of student loans and the increasing burden of student debt could be exacerbated by emerging technological shifts, particularly in the fields of artificial intelligence (AI) and automation. As industries evolve and more jobs become automated, many middle-class careers traditionally accessible to graduates may disappear or evolve into low-wage, low-security positions. This could lead to an even larger divide between the "haves" and "have-nots" in society, where only those with connections or elite educational backgrounds can secure stable, high-paying employment.

For students entering the workforce with massive student loan debt, this would present a troubling scenario where their ability to repay their loans becomes even more difficult as fewer well-paying jobs are available. This, in turn, would increase the financial strain on future generations of students who are already navigating a rapidly changing job market. For many, student loans could become an insurmountable barrier, keeping them trapped in cycles of debt that are impossible to escape.

Moreover, the increasing reliance on private companies to manage student loans, with their focus on profitability, could exacerbate these issues by offering fewer opportunities for income-driven repayment plans or relief options that account for the economic realities of an AI-powered, automation-driven economy. As the job market continues to shrink and evolve, the need for federal programs to support borrowers through tough economic times will only grow.

The Impact of Eliminating Borrower Protections

The elimination of borrower protections—such as PSLF, PAYE, ICR, and Borrower Defense to Repayment—would significantly worsen the student loan crisis. Public Service Loan Forgiveness, for example, allows individuals working in essential public service careers to receive loan forgiveness after ten years of qualifying payments. Without this program, many public servants would face a lifetime of insurmountable debt. Similarly, income-driven repayment programs allow borrowers to repay loans based on their income, making it easier for those in low-paying fields to manage their debt.

The Borrower Defense to Repayment program provides vital relief to students who were defrauded by their institutions. Without strong enforcement of this program, students may have no recourse to seek relief from predatory schools. The rollback of Gainful Employment regulations could further expose students to the risks of attending for-profit institutions that fail to deliver on their promises.

The Long-Term Fallout: A Dangerous Precedent

The long-term consequences of privatizing student loans could include exacerbating wealth inequality, widening the racial wealth gap, and creating an economic landscape where education debt is a permanent burden on a generation of students. If privatization moves forward, the financial burden of education will likely become a far more persistent and overwhelming problem, especially for those who can least afford it.

What’s particularly concerning is that in past crises, it’s the elites—wealthy colleges, financial institutions, and large corporations—that have consistently received the bulk of government bailouts. The same institutions that contribute the least to solving the country’s educational inequities continue to benefit from taxpayer-funded relief. If privatization moves forward, we cannot allow the same pattern to repeat itself. The majority of relief should go to those most burdened by student debt, not those who already have the means to navigate the system with ease.

The Future of Higher Education Debt: A Call to Protect Federal Loan Programs

At the Higher Education Inquirer, we stand in full support of federal student loan forgiveness and repayment programs, including PSLF, PAYE, and ICR, as they offer essential pathways for borrowers, especially public service workers and low-income individuals. These programs provide vital relief to borrowers, allowing them to focus on their careers without the burden of overwhelming debt. We urge policymakers to protect, enhance, and expand these vital initiatives to ensure that education remains accessible and equitable for all.

As we continue to face challenges in higher education financing, it is crucial to learn from past mistakes and advocate for systems that prioritize the well-being of students, not profit. The proposed privatization of the student loan system threatens to undo decades of progress and burden future generations with lifelong debt. It is essential that we protect these programs and work toward a solution that prioritizes education and fairness over corporate interests.

Monday, March 31, 2025

March Update on Student Debt (Debt Collective)

The federal government is a sh*t show right now. From ICE abductions of pro-Palestine college students to proposed cuts to Social Security and Medicaid, the Trump administration is wreaking havoc on all of our communities.

We want to take a moment and specifically talk about student debt and higher education — work that we’ve been doing for a while now. Here’s some of what we know, what we think, and what we should do:

In recent days, the Trump administration issued an executive order to dismantle the Department of Education. Legally, this cannot be done without Congress, but in practice, this means most of the staff was simply fired. We talked a little bit about what that means for student debtors in this Twitter thread. In short, this makes the student debt crisis much worse.

Shortly after that, Trump ordered the entire federal student debt portfolio — all $1.7 trillion — to be moved from the Department of Education to the Small Business Administration (SBA). The Small Business Administration is another agency within the federal government. That means our collective creditor would still be the federal government. But will this move actually happen? Will our federal student loans somehow end up privatized? There is a LOT up in the air right now, and the short answer is we don’t know exactly what will happen, but we as debtors should remain nimble so we can exercise our collective power when we need to. Moving our student debt from the Department of Education to the SBA would be 1) illegal 2) administratively and practically difficult 3) lead to possible errors with your account.

If you haven’t already, we still highly recommend going to studentaid.gov and finding your loan details and downloading and/or screenshotting your history.

The traditional infrastructure we have long suggested debtors utilize to solve problems with their student debt — the Consumer Financial Protection Bureau (CFPB), the FSA ombudsman team, etc — have either been undermined or outright destroyed. This means there are fewer and fewer ways for us, student debtors, to get answers to problems with our student debt accounts. But we shouldn’t let Congress off the hook — we should make student loans Congress’ problem. They’re elected to serve us and it’s their job to attend to your needs.

Our friends at Student Borrower Protection Center (SBPC) have put together a helpful tool to open a case at your member of Congress’s office.

Lastly, we want to talk about what we mean when we say Free College. Student debt has ruined lives, and will continue to as long as it exists. We shouldn’t have to borrow to pay for college — in fact, we shouldn’t have to pay at all. It should be free. And that’s what we’re fighting for. But our vision for College For All doesn’t stop at tuition-free — it means ICE and cops off campus; it means paying workers, faculty and staff a living wage; it means standing up for free speech; it means ending domestic and gender based violence on campus; and it means universities that function as laboratories for democracy and learning, not as laboratories for landlords and imperialism.

On April 17th, Debt Collective is co-sponsoring the National Higher Education Day of Action to demand our vision of College For All and oppose the hell the Trump administration is causing right now. Find an event near you HERE to participate — or start an event on your own!

And THIS SATURDAY – April 5th –we’re taking to the streets with hundreds of thousands of people across the country to tell Trump and Musk “Hands Off Our Democracy!” They’re stripping America for parts, and it's up to us to put an end to their brazen power grab. This will be one of the largest mass mobilizations in recent history — and we need you in the streets with us. There are hundreds of actions planned, find one to join near you HERE.

Whatever happens in the future, we will be more likely to win if we gird ourselves with each other’s stories and experiences so we can fight together. This is why we built a debtors’ union — the only virtual factory floor for debtors. Debt acts as a discipline and keeps people from joining the struggle for things we care about — but we can increase our numbers and build power by canceling unjust debts. We all share the same creditor and we need to stay connected to one another. Forward this email to a friend or family member and tell them to join the union and our email list so we can stay connected.

In Solidarity,

Debt Collective

Saturday, March 29, 2025

CBO's Revised Student Loan Projections and FSA Operational Costs (Glen McGhee)

The Congressional Budget Office (CBO) has dramatically revised its projections for the federal student loan program, transforming what was once expected to be a profitable government investment into a significant fiscal liability. This report examines the details of these projection changes and analyzes the operational costs of the Federal Student Aid (FSA) program.

The CBO's updated budget projections released in 2024 reveal a stark shift in the expected financial performance of the federal student loan program. These projections represent a significant revision from earlier expectations and highlight growing concerns about the sustainability of current student lending policies.

According to the Committee for a Responsible Federal Budget (CRFB), the estimated federal cost of student loans issued between 2015 and 2024 has increased by $340 billion – transforming from a projected gain of $135 billion in the 2014 baseline to an expected loss of $205 billion in the 2024 baseline15. This represents a complete reversal in the financial outlook for the program over the past decade.

This dramatic shift is particularly evident when examining the changing projections for specific loan cohorts. In 2014, the CBO projected that taxpayers would generate an 11-cent profit for every dollar of student loans issued by the federal government in fiscal year 2024. However, the most recent projections indicate that taxpayers will instead incur a 20-cent loss per dollar of loans issued this fiscal year6.

Looking ahead, the situation appears even more concerning. Over the 2024-2034 budget window, the CBO expects federal student loans to cost taxpayers $393 billion1. This amount exceeds the $355 billion CBO expects to be spent on Pell Grants, the flagship college aid program for low-income students, over the same time period1.

The projected $393 billion cost includes several components:

$221 billion in losses on the $1.1 trillion in student loans the federal government will issue during this period
$140 billion in re-estimates of the losses taxpayers will bear on outstanding loans
$34 billion toward administering the student loan programs6

One particularly concerning aspect of the CBO projections is the growing cost of graduate student loans. These loans are expected to make up around half of new student loans originated in the current fiscal year11. The CBO projects that taxpayers will lose $102 billion on lending to graduate students over the coming decade11. According to the CRFB, graduate school loans are now nearly as subsidized as undergraduate loans and make up half of the cost of newly issued student loans15.

The dramatic increase in projected costs has several primary causes, as identified in the CBO reports and analyses by financial experts.

The primary catalyst for the growing losses is the expansion and increased utilization of income-driven repayment (IDR) plans6. While a borrower repaying loans under a traditional fixed-term repayment plan typically repays more than the initial amount borrowed, a typical borrower using an IDR plan will repay significantly less than the original loan amount6.

The CBO projects that taxpayers will lose between 30 and 48 cents for every dollar in federal student loans issued in fiscal year 2024 and repaid on an IDR plan1. Preston Cooper notes in his LinkedIn post that "the role of IDR plans in driving these costs can't be overstated. CBO generally expects taxpayers to profit on loans repaid through traditional fixed-term repayment plans. But loans repaid on IDR plans will incur losses ranging from 30 to 48 cents on the dollar"1.

The Biden administration's student loan forgiveness initiatives are cited as significant contributors to the growing cost of the program. The House Budget Committee press release states that "$140 billion or over a third of this cost directly stems from President Biden's student loan forgiveness schemes"7. These initiatives include changes to income-driven repayment plans to make them more generous1.

Beyond the projected losses on the loans themselves, the Federal Student Aid (FSA) program incurs significant operational costs to administer federal student aid programs.

According to FSA's 2024 annual report, the agency operated on an annual administrative budget of approximately $2.1 billion during FY 20244. As of September 30, 2024, FSA was staffed by 1,444 full-time employees who are primarily based in FSA's headquarters in Washington, DC, with additional staff in 10 regional offices throughout the country4.

The Department of Education's Salaries and Expenses Overview provides additional insight into how these administrative funds are allocated. The Student Aid Administration account consists of two primary components:

Salaries and Expenses
Servicing Activities

In the fiscal year 2020 budget request, for example, the Student Aid Administration account totaled $1,812,000,000, with $1,281,281,000 allocated for Salaries and Expenses and $530,719,000 for Servicing Activities5.

The latest CBO projections highlight a dramatic shift in the financial outlook for the federal student loan program. What was once projected to be a profitable government investment has transformed into a significant fiscal liability, with taxpayers expected to lose hundreds of billions of dollars over the next decade.

This transformation raises important questions about the sustainability of current policies and the potential need for reforms to address growing costs. The substantial operational budget of FSA ($2.1 billion annually) adds to the overall fiscal impact of federal student aid programs.

As policymakers consider the future of federal student aid, they will need to grapple with balancing access to higher education with fiscal responsibility and ensuring that federal resources are allocated efficiently and effectively.

Citations:

Wednesday, March 26, 2025

A Planned Failure? The Dangerous Path to Privatizing Student Loans

The Alleged 'Rescue' of the Loan Portfolio

The White House has framed the transfer as a necessary step to relieve the Department of Education (ED) of a heavy burden, positioning the Small Business Administration as the new "caretaker" of the nation’s student debt. According to President Trump, the SBA—under the leadership of Kelly Loeffler—will now handle the $1.8 trillion student loan portfolio, while the Department of Education focuses on other key educational initiatives.

The SBA’s Inexperience with Student Loans

For starters, the SBA has no real experience with managing educational debt. Historically, the agency has focused on small business loans, a niche financial product entirely different from student loans. The SBA is not equipped to handle the complex structure of federal student loans, which include income-driven repayment plans, loan forgiveness programs, and myriad protections for borrowers struggling to repay their debt.

While the SBA does have experience guaranteeing loans, it has never managed a portfolio of this size or complexity. With the agency also facing a 43% workforce reduction, including 2,700 staff members, it seems highly unlikely that the SBA will be able to competently manage the student loan system—especially when 40% of these loans are already in default or behind on payments.

This raises an obvious question: is the SBA being set up to fail?

The Planned Failure

According to several former senior officials within the Department of Education and others close to the discussions, the transfer of the student loan portfolio to the SBA could very well be a deliberate failure. These sources suggest that the true purpose of the transfer is not to improve the system, but to destabilize it—creating a crisis that would ultimately justify selling off the loan portfolio to private companies. In other words, the apparent "failure" of the SBA to manage the loans could be the prelude to a much broader and more damaging shift.

“This is the classic playbook of the privatization agenda: create a crisis, then say the only solution is to sell off the asset to the private sector,” one former senior Education Department employee explained. “If the SBA fails to manage the portfolio, it will create a narrative that only the private sector can do it effectively, and that will pave the way for Wall Street to swoop in.”

This strategy mirrors similar efforts in other sectors, where privatization has often been sold as a solution to government inefficiency. In the case of student loans, the "failure" of the SBA to properly manage the portfolio could lead to a private sector takeover, where for-profit companies would be free to set the terms of repayment, charge higher interest rates, and strip away borrower protections—all at the expense of consumers.

The Consumer Cost

While the government may pocket the short-term profits from selling off the portfolio, it is borrowers who will feel the brunt of the consequences. Private companies, driven by the desire for profits, would have little incentive to offer the same borrower-friendly protections currently available under the federal student loan system.

The end of income-driven repayment options, the loss of loan forgiveness programs, and an end to the temporary moratorium on student loan payments could push millions of borrowers into even deeper financial distress. Higher interest rates, less favorable repayment terms, and a complete lack of support for struggling borrowers are all potential outcomes if the loans are sold to the private sector.

Moreover, the move could disproportionately affect low-income borrowers and those already in default, who would likely face harsher terms under a privatized system. For many, this could mean years—or even decades—of paying off debt that continues to balloon, with no hope of relief.

A Dangerous Precedent

If this plan succeeds, it will set a dangerous precedent. The government's involvement in student loans has, for decades, been a safety net for borrowers. The idea of privatizing this essential system could open the floodgates for more essential public services to be sold off to private corporations, with little regard for the public good.

“Once you give the private sector control over something as critical as education debt, it’s hard to see where it stops,” said another insider. “This is not just about student loans. It’s about how we view the role of government in providing public services.”

The Long-Term Fallout

In the long run, the privatization of student loans could exacerbate the country’s growing wealth inequality, widen the racial wealth gap, and place an insurmountable burden on future generations of borrowers. For many, student loans are not just a financial issue—they are a life issue, affecting everything from career prospects to the ability to buy a home or start a family. The sale of the loan portfolio could result in an economic landscape where the cost of education becomes a permanent burden on a generation, with few avenues for relief.

A Predatory Scheme?

The proposed transfer of the student loan portfolio to the SBA may appear to be an effort to reform the system, but closer inspection reveals a much darker agenda: one that seeks to create a crisis that will pave the way for the privatization of federal student loans. While the government may stand to gain in the short term, the long-term consequences for borrowers could be devastating.

In the end, the real price of this maneuver will be paid by consumers, who could face higher costs, fewer protections, and more financial instability. If this plan moves forward as expected, it will be a devastating blow to the millions of Americans who rely on the federal student loan system—a Pyrrhic victory that benefits private interests, but leaves consumers to bear the consequences.

In the quest for privatization, the true cost of this gamble may well be borne by those who can least afford it: the borrowers.

Thursday, March 13, 2025

States, Suing Trump Over Gutting of Education Dept., Cite Threat of Predatory College Abuses (David Halperin)

Twenty-one Democratic state attorneys general sued President Trump and Secretary of Education Linda McMahon today, 48 hours after the Department of Education announced it was firing more than 1,300 employees, which, combined with previously Trump-Musk efforts to cull the staff, reduced the employee roster to less than half of the 4000+ person team that was working as of January.

The 53-page complaint, filed in federal court in Massachusetts, alleges that the staff reductions are illegal and unconstitutional, because they are “equivalent to incapacitating key, statutorily-mandated functions of the Department.” The AGs say that although McMahon has authority from Congress to restructure the Department, she is “not permitted to eliminate or disrupt functions required by statute, nor can she transfer the department’s responsibilities to another agency outside of its statutory authorization.”

Among the federal statutes that the state AGs contend will be undermined by this week’s staff cuts are those covering higher education, including the Department’s obligations to ensure that federal student grants and loans may be used only at colleges and universities that provide quality educations and comply with the law. The complaint notes that the Department is charged with ensuring that colleges receiving federal aid are financially responsible, that they submit to financial audits, and that they provide adequate counseling to students concerning debt management.

The AGs also note that the Department is required to review and approve private college accrediting agencies, because under the law only schools approved by Department-recognized accreditors are eligible for federal student aid. Without that process, the AGs warn, “institutions of higher education may engage in profit-seeking behaviors without relating any educational benefits to students.”

The AGs might have added that the cuts will undermine the capacity of the Department to directly investigate colleges that engage in predatory and deceptive behavior. Data released by the Department shows the largest number of layoffs — 326 people — were at the Office of Federal Student Aid (FSA), which oversees student lending and school compliance with legal obligations not to mislead and abuse students.

The Department of Education’s higher education accountability efforts over decades have often been half-hearted and ineffectual; despite the scores of staff assigned to overseeing colleges, many students, and hundreds of billions in taxpayer dollars, have been directed to deceptive, poor-quality schools that have left many students worse off than when they started. But gutting these efforts to the degree suggested by this week’s staff reductions would make matters much worse. And the first-term higher education record of President Trump, guided by Secretary of Education Betsy DeVos and her aide Diane Auer Jones, was heavily skewed in favor of slashing accountability rules and enforcement, providing no reason to be optimistic that an aim of slashing the staff this year is to improve accountability.

The cuts would also undermine core Department responsibilities in K-12 education, civil rights, disability rights, privacy rights, campus safety, and the student loan portfolio.

Secretary McMahon is publicly insisting that everything will be fine and more efficient with the reduced and reorganized staff. But, as the new lawsuit from the attorneys general notes, McMahon said on Tuesday that the firing are the “first step” on the road to a “total shutdown” of the Department.

The attorneys general who filed the complaint are from Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, Oregon, Rhode Island, Washington, Wisconsin, Vermont and the District of Columbia.

Former Department officials and education advocates plan to rally Friday morning at 8 am outside Department of Education headquarters in Washington to protest the mass firings and plans to shut down the agency.

[Editor's note: This article originally appeared on Republic Report.]

Secretary of Education Linda McMahon Scheduled for ASU+GSV Summit, April 8, 2025

On April 8, 2025, US Secretary of Education Linda McMahon will give a fireside chat at ASU+GSV, an edtech conference held in San Diego, California.

President Trump has tasked McMahon with dismantling the federal agency that oversees federally funded K-12 and higher education programs. In less than two weeks she has done just that.

Half of ED's staff have already been fired or taken a payout, and the $1.7T student loan portfolio is likely to be transferred to the US Treasury.

There is no word yet on whether there will be demonstrators at the conference, but we expect some form of vocal nonviolent resistance. AFT President Randi Weingarten is also scheduled to appear.

Wednesday, March 12, 2025

Risepoint: The Rise and Fall of Another OPM?

In recent years, the online education sector has seen dramatic growth, largely fueled by partnerships between universities and Online Program Managers (OPMs) like Risepoint (formerly known as Academic Partnerships). These companies promised to help institutions expand their online offerings, providing technical support, marketing services, and student recruitment in exchange for a significant share of tuition revenue. However, as OPMs grew in power, their business models came under intense scrutiny for potentially exploitative and predatory practices.

The Rise of Risepoint

Risepoint, initially founded as Academic Partnerships (AP) in 2007 by Randy Best, became a leading player in the OPM space, helping universities launch and manage online degree programs. In return, Risepoint took a significant cut of the tuition fees, sometimes as much as 50%. The company’s model relied heavily on tuition-share agreements, which have long been controversial due to the significant financial burden they place on both institutions and students.

These arrangements became more contentious as the cost of higher education continued to rise, particularly in the case of online degrees. Critics argue that the large sums taken by OPMs like Risepoint divert essential funds from universities, leading to higher tuition fees and contributing to the growing student debt crisis. This concern has been amplified by the rise in aggressive recruitment tactics employed by OPMs, which often target low-income students with promises of easy access to higher education without fully disclosing the financial implications.

Randy Best's Ties to Republicans: A Controversial Network

Randy Best, the founder of Academic Partnerships, had close connections to prominent Republicans, including Jeb Bush, the former governor of Florida. Best has been a well-known advocate for education reform and has built a network of relationships within both political parties. His close ties to Bush, a key figure in education policy, have been part of a broader pattern of OPM companies gaining influence across the political spectrum.

This bipartisan network of political connections allowed Best and Academic Partnerships to navigate the political landscape and expand their reach in the higher education sector. However, critics argue that such ties may have contributed to a lack of accountability for OPM companies like AP/Risepoint, who have operated with little oversight while profiting off of public institutions.

Risepoint's Ownership: The Vistria Group and Its Ties to the Obama Administration

A key piece of Risepoint’s corporate structure lies in its ownership by Vistria Group, a Chicago-based venture capital firm with close ties to political and corporate elites, including former President Barack Obama. In 2019, Vistria Group acquired Academic Partnerships for its Vistria II fund, adding the company to a broader portfolio that includes a number of for-profit education assets such as Edmentum, Vanta Education, FullBloom Education, MSI Information Services, Apollo Education Group, and Unitek Learning.

Vistria’s co-founder, Marty Nesbitt, is a close friend of Barack Obama, and the firm has been associated with several high-profile political figures. Nesbitt himself is known to have worked closely with Obama on various initiatives, and his connections have helped Vistria expand its reach in the education sector. The firm’s investment in Risepoint underscores a broader trend of venture capital firms seeking profit from higher education, leading to concerns about the growing corporate influence on public institutions and their students.

The Controversy at the University of Texas-Arlington

The close connections between OPMs and university leaders have not been without scandal. In 2020, Vistasp Karbhari, the president of the University of Texas-Arlington, resigned following a controversy involving his relationship with Academic Partnerships. Karbhari had accepted two international trips paid for by the company, sparking an investigation into potential conflicts of interest. The university had paid Academic Partnerships more than $178 million over a five-year period for managing its online degree programs.

This situation drew public attention to the potential for improper financial relationships between university administrators and private OPM companies. The high cost of these partnerships, particularly the large amounts paid to OPMs like Academic Partnerships, raised questions about whether universities were prioritizing student outcomes or simply enriching private firms at the expense of public funds.

Minnesota Leads the Way: A State Takes Action

The controversy surrounding tuition-share deals reached a boiling point in 2024 when Minnesota became the first state to pass legislation restricting these agreements. St. Cloud State University in Minnesota had signed a tuition-share deal with Risepoint that resulted in the company receiving a substantial percentage of tuition revenue. Critics of the arrangement argued that the deal drained valuable resources from public universities, while enriching private companies at the expense of students.

In response to mounting pressure, Minnesota lawmakers passed a bill banning new tuition-share agreements with OPMs, signaling a shift toward greater oversight of these partnerships. The move was hailed by critics as a much-needed reform to protect public institutions and students from exploitative business models.

Senate Concerns and Growing Backlash

In addition to state-level efforts, U.S. Senators Elizabeth Warren, Sherrod Brown, and Tina Smith raised concerns over OPM practices in a 2024 letter to eight major OPM companies, including Risepoint. The senators questioned whether the recruitment tactics and revenue-sharing models contributed to rising student debt and whether these companies were sufficiently transparent about how tuition funds were being used.

“We continue to have concerns about the impact of OPM partnerships on rising student debt loads,” the senators wrote. They specifically targeted the high percentage of tuition revenue taken by OPMs, arguing that this model created financial disincentives for universities to lower costs or improve educational outcomes for students.

In response, Risepoint and other OPM companies indicated a willingness to engage with policymakers, but the growing scrutiny of their business practices indicates that their influence in the higher education space may be waning.

Academic Partnerships Acquires Wiley’s Online Business

In an interesting turn of events, AP/Risepoint expanded its reach in November 2023 by acquiring Wiley’s online business for $150 million. This acquisition is part of a broader trend of consolidation in the OPM sector, as companies seek to maintain their competitive edge in an increasingly saturated market.

The deal underscores Risepoint’s ambition to broaden its portfolio of online education services, even as its business practices face growing criticism. While Risepoint sees this acquisition as a growth opportunity, others view it as a sign of the consolidation of power within the OPM sector—a market that has been repeatedly criticized for its lack of transparency and for its role in inflating costs for both universities and students.

New Department of Education Guidelines

As the federal government joined the conversation, the U.S. Department of Education took steps to regulate the OPM industry more closely. In January 2025, the department issued new guidance that could lead to penalties for colleges that allow their OPM partners to mislead students. The guidance prohibits OPM employees from using college email addresses or signatures that imply they are employed by the institution, as well as from misrepresenting the quality of online programs.

The Department of Education’s actions came in response to long-standing concerns about misleading marketing practices. Student advocacy groups have called for stronger oversight of OPMs, which often promise students high-quality education without fully disclosing the financial ramifications. “OPMs commonly mislead students about the quality of their online programs, and that is illegal,” said Carolyn Fast, director of higher education policy at The Century Foundation.

The Decline of OPM Growth

However, the OPM industry is showing signs of slowing down. A report by Validated Insights in October 2024 revealed that OPM growth has dramatically slowed, with 147 partnerships ending in 2023—the highest number of contract terminations since 2020. Additionally, new contracts for 2024 have dropped by more than 50%. This slowdown signals that many universities are reevaluating their reliance on OPMs like Risepoint, opting instead to bring online programs in-house or partner with alternative providers.

The reduction in OPM partnerships reflects broader trends in higher education, where increasing scrutiny over business models, rising student debt, and calls for greater accountability are reshaping the landscape. Universities are under increasing pressure to justify the cost and efficacy of online degree programs, and many are finding that the financial burden of partnering with OPMs may no longer be sustainable.

The Future of Risepoint and the OPM Industry

The scrutiny surrounding Risepoint and other OPMs is part of a larger conversation about the future of online education and the need for greater transparency in how these programs are marketed and funded. As states like Minnesota lead the charge to limit tuition-share agreements, and as federal agencies take a more active role in regulating the industry, the days of unchecked growth for OPMs may be numbered.

Risepoint, once a leader in the OPM space, now faces a rapidly changing regulatory environment that threatens its business model. While the company continues to acquire new assets like Wiley’s online business, the industry as a whole may be entering a period of retrenchment, with universities becoming more cautious about entering into partnerships with companies that take a large cut of tuition revenue.

As the OPM industry faces increasing scrutiny and regulatory challenges, the future of companies like Risepoint remains uncertain. What is clear, however, is that the once-booming market for online program management is shifting, and the predatory practices that have long been associated with OPMs are being closely examined. Whether Risepoint can adapt to these changes or whether the OPM model as a whole will undergo significant reform remains to be seen.

Monday, March 10, 2025

Trump Budget Will Reveal How Extensive ED is Dismantled in 2025

Some time this March, President Trump's US Budget proposal will be submitted. It would not be out of the realm of possibility that budget cuts to the US Department of Education exceed 70 percent if the $1.7 Trillion Student Loan Portfolio is transferred to the US Treasury. President Biden's 2024 Budget for the US Department of Education was published March 11, 2024. This is what the proposal typically looks like.

Tuesday, March 4, 2025

The Future of Federal Student Loans

The U.S. student loan system, now exceeding $1.7 trillion in debt and affecting over 40 million borrowers, is facing significant challenges. As political pressures rise, the management of student loans could be significantly altered. A combination of potential privatization, the elimination of the U.S. Department of Education (ED), and a new role for the Department of the Treasury raises critical questions about the future of the system.

U.S. Department of Education: Strained Resources and Outsourcing

The U.S. Department of Education (ED) is responsible for managing federal student loan servicing, loan forgiveness programs, and borrower defense to repayment (BDR) claims. However, ED has faced ongoing issues with understaffing and inefficiency, particularly as many functions have been outsourced to contractors. Companies like Maximus (including subsidiaries like AidVantage) manage much of the administrative burden for loan servicing. This has raised concerns about accountability and the impact on borrowers, especially those seeking loan relief.

In recent years, ED has also experienced staff reductions and funding cuts, making it difficult to process claims or maintain high-quality service. The potential for further cuts or even the elimination of the department could exacerbate these problems. If ED’s role is diminished, other entities, such as the Department of the Treasury, could assume responsibility for managing the student loan portfolio, though this would present its own set of challenges.

Potential for Privatization of the Student Loan Portfolio

One of the most discussed options for addressing the student loan crisis is the privatization of the federal student loan portfolio. Under previous administration discussions, including those during President Trump’s tenure, there were talks about selling off parts of the student loan portfolio to private companies. This would be done with the aim of reducing the federal deficit.

In 2019, McKinsey & Company was hired by the Trump administration to analyze the value of the student loan portfolio, considering factors such as default rates and economic conditions. While the report's findings were never made public, the idea of transferring the loans to private companies—such as banks or investment firms—remains a possibility.

The consequences of privatizing federal student loans could be significant. Private companies would likely focus on profitability, which could result in stricter repayment terms or less flexibility for borrowers seeking loan forgiveness or other relief options. This shift may reduce borrower protections, making it harder for students to challenge repayment terms or pursue loan discharges.

The Department of the Treasury and its Potential Role

If the U.S. Department of Education is restructured or eliminated, there is a possibility that the Department of the Treasury could step in to manage some aspects of the student loan portfolio. The Treasury is responsible for the country’s financial systems and debt management, so it could, in theory, handle the federal student loan portfolio from a financial oversight perspective.

However, while the Treasury has experience in financial management, it lacks the specialized knowledge of student loans and borrower protections that the Department of Education currently provides. For example, the Treasury would need to find ways to process complex Borrower Defense to Repayment claims, a responsibility ED currently manages. In 2023, over 750,000 Borrower Defense claims were pending, with thousands of claims related to predatory practices at for-profit colleges such as University of Phoenix, ITT Tech, and Kaplan University (now known as Purdue Global). Additionally, some of these for-profit schools were able to reorganize and continue operating under different names, further complicating the situation.

The Treasury could also contract out loan servicing, but this could increase reliance on profit-driven companies, possibly compromising the interests of borrowers in favor of financial performance.

Borrower Defense Claims and the Impact of For-Profit Schools

A large portion of the Borrower Defense to Repayment claims comes from students who attended for-profit colleges with a history of deceptive practices. These institutions, often referred to as subprime colleges, misled students about job prospects, program outcomes, and accreditation, leaving many with significant student debt but poor employment outcomes.

Data from 2023 revealed that over 750,000 Borrower Defense claims were filed with the Department of Education, many of them against for-profit institutions. The Sweet v. Cardona case showed that more than 200,000 borrowers were expected to receive debt relief after years of waiting. However, the process was slow, with an estimated 16,000 new claims being filed each month, and only 35 ED workers handling these claims. These delays, combined with the uncertainty around the future of ED, leave borrowers vulnerable to prolonged financial hardship.

Lack of Transparency and Accountability in the System

While the U.S. Department of Education tracks Borrower Defense claims, it does not publish institutional-level data, making it difficult to identify which schools are responsible for the most fraudulent activity.

In response to this, FOIA requests have been filed by organizations like the National Student Legal Defense Network and the Higher Education Inquirer to obtain detailed information about which institutions are disproportionately affecting borrowers.

In one such request, the Higher Education Inquirer asked for information regarding claims filed against the University of Phoenix, a school with a significant number of Borrower Defense claims.

The lack of transparency in the system makes it harder for borrowers to make informed decisions about which institutions to attend and limits accountability for schools that have harmed students. If the Treasury or private companies take over management of the loan portfolio, these transparency issues could worsen, as private entities are less likely to prioritize public accountability.

Conclusion

The future of the U.S. student loan system is uncertain, particularly as the Department of Education faces the potential of funding cuts, staff reductions, or even complete dissolution. If ED’s role diminishes or disappears, the Department of the Treasury could take over some functions, but this would raise questions about the fairness and transparency of the system.

The possibility of privatizing the student loan portfolio also looms large, which could shift the focus away from borrower protections and toward financial gain for private companies. For-profit schools, many of which have a history of predatory practices, are responsible for a disproportionate number of Borrower Defense claims, and any move to privatize the loan portfolio could exacerbate the challenges faced by borrowers seeking relief from these institutions.

Ultimately, there is a need for greater transparency and accountability in how the student loan system operates. Whether managed by the Department of Education, the Treasury, or private companies, protecting borrowers and ensuring fairness should remain central to any future reforms. If these issues are not addressed, millions of borrowers will continue to face significant financial hardship.

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