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Friday, January 24, 2025
Frances Perkins, Secretary if Labor (Friday's Labor Folklore)
Wednesday, July 12, 2023
University of Phoenix and the Ash Heap of Higher Ed History
(Updated September 14, 2023)
The University of Phoenix (or at least its name) may soon enter the ash heap of US higher education history--and rise again as a state-run robocollege. But it shouldn't--at least not yet. Once hailed as the leader in affordable adult education for workers entering middle management, it is a shell of its former self--in an economy less certain for workers and consumers.
With the school's wreckage are approximately one million people buried alive in an estimated $14B-$35B in student loan debt.
Pattern of Fraud
As of January 2023, more than 69,000 of these student loan debtors have filed Borrower Defense to Repayment fraud claims with the US Department of Education against the University of Phoenix (UoPX). Many more could file claims when they become aware of their rights to debt relief. In the partial FOIA response below, the US Department of Education reported that 69,180 Borrower Defense claims had been made against the school.
In a recent federal case, Sweet v Cardona, most if not all of the 19,860 "denied" cases were overturned in favor of the student loan debtors. We estimate the smaller number of fraud claims alone to amount to hundreds of millions of dollars.
Through a FOIA request, we also discovered 6,265 consumer complaints in the FTC database. In 2019, the FTC and the University of Phoenix settled a claim for $191M for deceptive employment claims. Based on the consumer complaints, we have no reason to believe that Phoenix has changed its behavior as a bad actor.
On May 3, 2023, six US Senators (Warren, Brown, Blumenthal, Durbin, Merkley, Hassan) called for the US Department of Education, Department of Veterans Affairs, and Department of Defense to investigate the University of Phoenix for launching a new program suggesting that it was a public university. The letter stated that the school "has long preyed on veterans, low-income students, and students of color."
Wolves in Sheep's Clothing
University of Phoenix's owners could potentially be liable for refunding the US government for the fraud. But as a state-related organization, it may be more politically difficult to claw back funds, no matter how predatory the school is.
Purdue University Global and University of Arizona Global set a precedence in state-related organizations acquiring subprime schools (Kaplan University and Ashford University) and rebranding them as something better. Whether they are better for consumers is questionable. Phoenix will have to cut costs, largely by reducing labor. Using Indian labor (like Purdue Global) and AI could be profitable strategies. It's likely that this deal, even if profitable, will add fuel to the growing skepticism of higher education in the US.
University of Phoenix's Finances
Apollo Global Management and Vistria Group currently own University of Phoenix but have been trying (unsuccessfully) to unload the subprime college for more than two years. Little is publicly known about the school's finances. What is known is that UoPX gets about $800M every year from the federal government, through federal student loans, Pell Grants, GI Bill funds, and DOD Tuition Assistance.
Despite this government funding, US Department of Education data show the school's equity value for the Arizona segment declined significantly, from $361M in FY 2018 to $187M in FY 2021.
$347M of the University of Phoenix's $518M in assets are intangible assets. Intangible assets typically include intellectual property and brand reputation. The school has $348M in liabilities.
The University of Phoenix has been reducing expenses by cutting instructional costs, from $70M in FY 2020 to $60M in FY 2021. UoPX spends about 8 percent of its revenues on instruction.
Attempts to Sell UoPX
There have been two known potential buyers for the University of Phoenix: the University of Arkansas System and the University of Idaho. In both cases, the owners required the potential buyers to keep the deal secret until the sale was imminent.
Fear of the impending higher education enrollment cliff appears to be an important pitch to potential buyers.
Arkansas, the first target, was in the process of making the deal, and it might have gone through if nit for the voice of one whistleblower and one outstanding investigative reporter, Debra Hale Shelton of the Arkansas Times.
In the case of Idaho, news of the potential deal was publicly noted just one day before the preliminary agreement was made with the Idaho Board of Education. Two other secret meetings were held before that.
A number of journalists including Kevin Richert (Idaho EdNews), Laura Guido (The Idaho Press), Troy Oppie (Boise State Public Radio), and Noble Brigham (Idaho Statesman) have exposed some of the problems and potential problems with the deal. In June, Idaho legislators began questioning the acquisition.
More recently, the opinion editor at the Idaho Statesman argued that the deal may actually be worthwhile.
Particulars about the finances are sketchy at best and misleading at worst. The University of Phoenix is said to include $200M in cash in the deal, but they have not said how much of that sum is required by law as "restricted cash"--money the school needs if the Department of Education needs to claw back funds. Phoenix also claims to be highly profitable, but without showing any evidence.
What is known about the deal is that the University of Idaho will have to borrow $685M and put its (bond) credit rating at risk. The school has not identified important information how the bonds would be sold (underwriters, bond raters, date to maturity, interest rate).
The University of Idaho has created an FAQ to answer questions about the sale, but HEI has identified a number of misleading statements about University of Phoenix's present finances (failure to report the school's equity), potential liability (cost of tens of thousands of Borrower Defense claims), and leadership (lack of background information about Chris Lynne, the President of the University of Phoenix). These deficiencies have been reported to the University of Idaho and to the Representative Horman.
On June 20, Idaho Attorney General Raul Labrador filed a lawsuit to halt, or at least slow down the deal.
The University of Idaho submitted a Pre-Acquisition Review from the US Department of Education, and it may take up to three months before the application is completed.
As of September 2023, the deal is far from done. Since this article was first published there have been a number of developments:
On September 11, US Senators Elizabeth Warren, Dick Durbin, and Richard Blumenthal called on University of Idaho President Green to abandon the sale. The Senators also asked Green if he had a plan to pay for the Borrower Defense claims, noting that University of Arizona may be on the hook for thousands of claims against Ashford University (aka University of Arizona Global campus).
In November, the Joint Finance-Appropriations Committee of the Idaho Legislature is expected to discuss the issue again.
*The Higher Education Inquirer has made a FOIA request for more up-to-date numbers from the US Department of Education. We have also filed FOIA requests with the FTC.
Related link:
The Growth of "RoboColleges" and "Robostudents"More Transparency About the Student Debt Portfolio Is Needed: Student Debt By Institution
Borrower Defense Claims Surpass 750,000. Consumers Empowered. Subprime Colleges and Programs Threatened.Wednesday, October 2, 2024
What would a second Trump administration mean for higher education? Summing up Project 2025 (Bryan Alexander)
We’ve been exploring this question over the past year, including months of reading, analysis, reflection, and conversation about Project 2025 might mean for higher education. Today I’d like to sum up what we found.
The book, Mandate for Leadership, addresses academia directly on multiple levels. I’ll break them down here. The implications for the broader society within which colleges and universities exist – that’s a subject for another post.
I’ve organized the various ideas and threads into several headers: the Department of Education, higher education economics, international education and research, research supported and opposed, military connections, sex education, and anti-intellectualism.
Higher education and the Department of Education Many accounts of Project 2025’s educational impact draw attention to its attack on the Department of Education, which makes sense, since this is where the document focuses its academic attention. to begin with, Mandate for Leadership wants to break up the DoE and distribute its functions to other federal units. For example, the work the Office for Postsecondary Education (OPE) does would move to the Department of Labor, while “programs deemed important to our national security interests [shift] to the Department of State.” (327).
It would revise the student loan system to a degree. “Federal loans would be assigned directly to the Treasury Department, which would manage collections and defaults.” (327-330) Income-based repayment schemes would continue, but with restrictions. (337-8) Project 2025 would end the Biden team’s Public Service Loan Forgiveness program, along with “time-based and occupation-based student loan forgiveness” plans. (361) More ambitiously, the new government could just privatize loans. (353)
The chapter’s author also calls for “rejecting gender ideology and critical race theory” in the department or through its successor units. (322) This might also proceed via changes to one law, as a new secretary would “[w]ork with Congress to amend Title IX to include due process requirements; define “sex” under Title IX to mean only biological sex recognized at birth; and strengthen protections for faith-based educational institutions, programs, and activities.” (333) This culture war move could have another legal feature, given the call to amend FERPA in order to make it easier for college students to sue the government for privacy violations, in response to school support of transgender and nonbinary students. (344-346)
The obverse of these moves is having the new DoE or its replacements “promulgat[ing] a new regulation to require the Secretary of Education to allocate at least 40 percent of funding to international business programs that teach about free markets and economics.” Additionally, the government would “require institutions, faculty, and fellowship recipients to certify that they intend to further the stated statutory goals of serving American interests,” although it’s unclear what that would mean in practice. (356)
This section’s author, Lindsay Burke, also wants the next administration to change its relationship with post-secondary accreditors. She supports Florida’s new policy of requiring public universities to cycle through accrediting agencies. (332) Burke also wants to encourage new accreditors to start up. (355) Her chapter further calls for a new administration to prevent accreditation agencies from advocating for diversity, equity, and inclusion (DEI) work on campuses. (352)
The economics of higher education The Department of Education chapter would see a revamped Department of Education or its successors “[r]equir[ing]… ‘skin in the game’ from colleges to help hold them accountable for loan repayment.” (341) I can’t see how this would work in detail. Her new federal administration would also reduce funding to academic research by cutting reimbursement for indirect costs. (355)
That section also wants to reduce the labor market’s demand for post-secondary degrees. Under the header “Minimize bachelor’s degree requirements” we find: “The President should issue an executive order stating that a college degree shall not be required for any federal job unless the requirements of the job specifically demand it.” (357). Later on in the book, the Department of Labor section section also calls on Congress to end college degree requirements for federal positions. (597) That chapter wants to boost apprenticeships, mostly likely in competition with college and university study. (594-5)
International research and education. Cutting down immigration is a major Project 2025 theme, and the book does connect this to academia. It calls out international students like so:
ICE should end its current cozy deference to educational institutions and remove security risks from the program. This requires working with the Department of State to eliminate or significantly reduce the number of visas issued to foreign students from enemy nations. (141)
First, this would impact many would-be students’ careers. Second, implementing such a policy would likely depress international student interest.
Project 2025 consistently focuses on China as America’s enemy, and this means it wants United States higher education to decouple from that adversary or else face consequences. For example, the introduction warns that “[u]niversities taking money from the CCP should lose their accreditation, charters, and eligibility for federal funds.” Later in the text is some language about the government and universities supporting American but not Chinese research and development. (100) Another section sees “research institutions and academia” playing a role in Cold War 2.0:
Corporate America, technology companies, research institutions, and academia must be willing, educated partners in this generational fight to protect our national security interests, economic interests, national sovereignty, and intellectual property as well as the broader rules-based order—all while avoiding the tendency to cave to the left-wing activists and investors who ignore the China threat and increasingly dominate the corporate world. (emphases added; 218)
Later on, the Department of Justice discussion offers this recommendation:
key goals for the China Initiative that included development of an enforcement strategy concerning researchers in labs and universities who were being coopted into stealing critical U.S. technologies, identification of opportunities to address supply-chain threats more effectively, and education of colleges and universities about potential threats from Chinese influence efforts on campus. (556)
This seems to describe increased DoJ scrutiny over colleges and universities. I’m not sure what “education… about potential threats” means, although I suspect it might include pressure on academics.
The Department of Commerce section wants to “[t]ighten… the definition of ‘fundamental research’ to address exploitation of the open U.S. university system by authoritarian governments through funding, students and researchers, and recruitment” (673) More succinctly, that chapter calls for strategic decoupling from China (670, 674). We can imagine a new federal administration – along with, perhaps, state governments, businesses, nonprofits, and foundations – asking academia to play its role in that great separation. One of the trade policy chapters broods about how “more than 300,000 Communist Chinese nationals attend U.S. universities” and it’s hard not to see this as a call for reducing that number. (785)
That chapter’s author, Peter Navarro, condemns one leading American university for allegedly enabling Chinese power:
Huawei, well-known within the American intelligence community as an instrument of Chinese military espionage, has partnered with the University of California–Berkeley on research that focuses on artificial intelligence and related areas such as deep learning, reinforcement learning, machine learning, natural language processing, and computer vision, all of which have important future military applications.28 In this way, UC–Berkeley, whether unwittingly or wittingly, helps to boost Communist China’s capabilities and quest for military dominance. (785-6)
I can’t help but read this as a call for federal scrutiny of academic international partnerships, with sanctions in the wings.
Project 2025 looks at other regions of the globe and wants higher education to help. For example, the State Department chapter calls on American campuses to assist its African policy: “The U.S. should support capable African military and security operations through the State Department and other federal agencies responsible for granting foreign military education, training, and security assistance.” (187)
Other federal units come in for transformation which impacts colleges and universities. One chapter calls for “reinstituti[ng] the National Security Higher Education Advisory Board.” (Wikipedia; 218) The USAID chapter would cut some post-secondary support, based on the argument that “[w]e must admit that USAID’s investments in the education sector, for example, serve no other purpose than to subsidize corrupt, incompetent, and hostile regimes.” (275)
Support for and opposition to research Project 2025 consistently calls for research and development, at least in certain fields. The Department of Energy chapter enthusiastically promotes science. That chapter also tends to pair research with security, so we might infer increased security requirements for academic energy work. Alternative energy and decarbonization research would likely not receive federal support from McNamee’s departments, as he might see them as a “threat to the grid.” (373)
The document also calls for transparency many times, which might benefit academics as it could (should it occur) give greater access to more documentation. One passage actually uses the language of open source code: “True transparency will be a defining characteristic of a conservative EPA. This will be reflected in all agency work, including the establishment of opensource [sic] science, to build not only transparency and awareness among the public, but also trust.” (417)
On the flip side, Project 2025 opposes climate research throughout. For a sample of the intensity of this belief,
Mischaracterizing the state of our environment generally and the actual harms reasonably attributable to climate change specifically is a favored tool that the Left uses to scare the American public into accepting their ineffective, liberty-crushing regulations, diminished private property rights, and exorbitant costs. (419)
That passage exists in the Environmental Protection Agency chapter, and fits into its author’s desire to cut back the EPA in general, but particularly to end its support for academic research. There are specific examples, such as “[r]epeal[ing] Inflation Reduction Act programs providing grants for environmental science activities” (440). This is also where we see a sign of Project 2025’s desire to get more political appointees into federal positions. There would be “a Science Adviser reporting directly to the Administrator in addition to a substantial investment (no fewer than six senior political appointees) charged with overseeing and reforming EPA research and science activities.” (436) That would have further negative effects on academic work.
Later on, the Department of Transportation chapter calls for shutting down the National Oceanographic and Atmospheric Administration (NOAA). Why? NOAA is “one of the main drivers of the climate change alarm industry and, as such, is harmful to future U.S. prosperity.” (675) Faculty, staff, and students who rely on NOAA would lose out.
Military and civilian higher education There are many connections here, reflecting a view that all of academia can contribute in an instrumental way to American military and foreign policy goals, while also being reformed by a new administration. For example, the text calls for reforming post-secondary military education, asking a new government to “[a]udit the course offerings at military academies to remove Marxist indoctrination, eliminate tenure for academic professionals, and apply the same rules to instructors that are applied to other DOD contracting personnel.” (104)
There’s also an idea for creating a new military academy, a Space Force Academy:
to attract top aero–astro students, engineers, and scientists and develop astronauts. The academy could be attached initially to a large existing research university like the California Institute of Technology or MIT, share faculty and funding, and eventually be built separately to be on par with the other service academies. (119)
Related to this, a later discussion calls for the creation of a new academic institution dedicated to financial warfare:
Treasury should examine creating a school of financial warfare jointly with DOD. If the U.S. is to rely on financial weapons, tools, and strategies to prosecute international defensive and offensive objectives, it must create a specially trained group of experts dedicated to the study, training, testing, and preparedness of these deterrents. (704)
Earlier in the book there’s some discussion of reforming the Pentagon’s purchasing systems calls for spreading some Defense Acquisition University (DAU) functions to “include accreditation of non-DOD institutions” – i.e., potentially some civilian institutions. (98)
Project 2025 would reverse certain Biden- and Obama-era human rights provisions for military academies’ faculty, staff, and students. It calls for “individuals… with gender dysphoria [to] be expelled from military service…” (103)
Sex education, research, support for student life All of this appears under threat. Here’s the relevant passage from the introduction, a shocking response to pornography: “Educators and public librarians who purvey [pornography] should be classed as registered sex offenders. And telecommunications and technology firms that facilitate its spread should be shuttered.” (5) This seems aimed at K-12 schools, where so much culture war battling has occurred, but we shouldn’t assume higher education would escape. Remember that it’s a common strategy for critics to label sex education and research materials as porn.
Anti-intellectualism Project 2025 respects knowledge and skills insofar as they assist with making a new administration succeed, but is at the same time very skeptical of their role in broader society, when formally recognized. It wants universities to develop new technologies, but not to advance DEI. For a clear sense of what I’m talking about, here’s the introduction’s take on credentials:
Intellectual sophistication, advanced degrees, financial success, and all other markers of elite status have no bearing on a person’s knowledge of the one thing most necessary for governance: what it means to live well. That knowledge is available to each of us, no matter how humble our backgrounds or how unpretentious our attainments. It is open to us to read in the book of human nature, to which we are all offered the key just by merit of our shared humanity. (10)
One could respond that most of the book’s authors possess intellectual sophistication and/or advanced degrees and/or financial success, but that’s part of the conservative populist paradigm.
Summing up, Project 2025 presents multiple challenges, threats, and dangers to American higher education. Proposed policies strike at academic teaching, research, finances, autonomy, and some of the most vulnerable in our community. It outlines routes for expanded governmental surveillance of and action upon colleges and universities, not to mention other parts of the academic ecosystem, such as accreditors and public research entities.
Keep in mind that Project 2025 isn’t necessarily a total guide to a potential Trump administration. The candidate has denounced it and led the publication of another platform. I’d like to explore that document next. We should also track Trump’s various pronouncements, such as his consistent desire to deport millions of people. For that alone we should expect a major impact on higher education.
Yet Project 2025 draws deeply on Republican politicians and office holders, not to mention conservative thinking. It seems fair to expect a new administration to try realizing at least a chunk of it, if not more.
What do you think of this sketch of a potential Trump administration?
Monday, April 28, 2025
Maximus AidVantage
The recent decision to have the Small Business Administration (SBA) take over the federal student loan portfolio has sent shockwaves through the world of education finance. As the SBA — an agency traditionally focused on supporting small businesses — begins to manage a multi-billion dollar portfolio of student loans, borrowers, consumer protection advocates, and financial experts alike are left to question what this transition means for the future of loan servicing, borrower protections, and higher education financing.
At the heart of this shift is the role of Maximus AidVantage, one of the major student loan servicers handling federal loans. Maximus has already come under scrutiny for its inefficiency, poor customer service, and mishandling of crucial borrower programs, such as Public Service Loan Forgiveness (PSLF) and Income-Driven Repayment (IDR) plans. The company’s track record has led to widespread frustration, with many borrowers reporting significant issues, including misinformation, lost paperwork, and mistakes that have placed them at risk of financial hardship.
Yet, despite these concerns, Maximus has maintained its position at the helm of federal student loan servicing. Its CEO, Bruce Caswell, has been compensated handsomely for overseeing the company’s role in this controversial space. According to recent financial reports, Caswell’s total compensation has included a base salary of over $1.3 million, with total compensation often exceeding $8 million when accounting for bonuses, stock options, and other forms of remuneration. This high pay, especially in light of the company’s poor performance in customer service and loan servicing, raises questions about the priorities of both the company and the federal government, which continues to entrust Maximus with managing the finances of millions of borrowers.
The Shift to the SBA: A Lack of Expertise
The most immediate concern surrounding the SBA’s takeover of student loan management is its lack of expertise in this field. The SBA’s core mission has been to assist small businesses, offering loan guarantees and financial support to promote economic growth. While it is well-equipped to manage business loans, the agency has no experience dealing with the unique and complex needs of student loan borrowers. Federal student loans involve intricate repayment plans, borrower protections, and specialized programs like PSLF, all of which require a deep understanding of the educational sector and the financial struggles of students and graduates.
Transferring such an important and complex responsibility to the SBA without a clear plan for adaptation could lead to mismanagement, inefficiencies, and disruptions for millions of borrowers. The SBA simply isn’t set up to handle issues like loan forgiveness, income-driven repayment plans, and the variety of special accommodations that are necessary for student borrowers. If the SBA isn’t adequately staffed or resourced to take on these new responsibilities, students could be left in the lurch, facing delays, confusion, and even errors in their loan servicing.
A Confusing Transition for Borrowers
For those already dealing with the intricacies of federal student loans, this transition to the SBA is likely to create a significant amount of confusion. Student loan borrowers rely on clear communication, accurate account management, and timely assistance when navigating repayment plans. The Department of Education has long been the agency responsible for ensuring that these programs are managed effectively, but with the SBA taking over, borrowers may face new systems, new contacts, and, potentially, a lack of clarity about their loan status.
One of the biggest risks in this transition is the potential disruption of critical loan repayment programs, such as PSLF, which allows public service workers to have their loans forgiven after ten years of payments. These programs require careful management to ensure that borrowers meet the necessary qualifications. The SBA is not accustomed to handling such programs and may struggle to maintain the same level of efficiency and accuracy, especially if the agency does not prioritize dedicated support for student loan borrowers.
Diminished Consumer Protections
Perhaps the most concerning outcome of the SBA taking over student loans is the potential erosion of consumer protections. The Department of Education has a specific mandate to protect borrowers, which includes holding loan servicers accountable for mishandling accounts and ensuring transparency in loan servicing practices. The SBA, however, has never been tasked with such consumer-focused regulations, and its shift to managing student loans raises concerns that borrower rights might not be adequately enforced.
For example, the SBA may not have the resources or inclination to monitor loan servicers like Maximus closely, allowing them to continue engaging in deceptive practices without fear of regulatory repercussions. The agency might also be less likely to step in when borrowers face issues such as misapplied payments, incorrect information about forgiveness programs, or poorly managed accounts. With the SBA’s focus on business rather than consumer welfare, student loan borrowers may find themselves facing more hurdles without the protections that the Department of Education once provided.
The Impact on Repayment and Forgiveness Programs
Another pressing issue is the potential disruption of repayment and forgiveness programs under SBA oversight. Programs like Income-Driven Repayment (IDR), designed to help borrowers pay off their loans based on their income, require careful management and regular updates. Similarly, the Public Service Loan Forgiveness program is highly specific and requires rigorous tracking of borrowers’ payments and work history to ensure they qualify for forgiveness after ten years.
If the SBA is not adequately equipped to handle these specialized programs, borrowers might find themselves in a precarious position, especially if their loans are mismanaged or if they are denied forgiveness due to administrative errors. The confusion caused by the transition could delay or even derail borrowers’ efforts to achieve loan forgiveness, leaving them stuck with debt for longer than expected.
The Role of Maximus: Financial Incentives Amidst Failure
Amidst the uncertainty of this transition, Maximus continues to play a key role in servicing the federal student loan portfolio. Yet, despite its persistent failures in managing accounts and borrower relations, Maximus has remained highly profitable, with Bruce Caswell’s executive compensation reflecting this success in terms of revenue but not in terms of customer satisfaction.
Maximus’s reported $8 million in total compensation for Caswell, despite the company’s history of customer complaints, raises serious questions about priorities. While Maximus rakes in millions from servicing federal loans, borrowers are left to deal with the consequences of mistakes, misinformation, and poor service. In a system where the stakes are incredibly high for borrowers, this disparity between executive pay and customer service is concerning, especially in light of the SBA’s takeover, which promises more uncertainty.
Adding to the controversy, Maximus has also been involved in labor disputes with the Communications Workers of America (CWA), its workers' union. These disputes, which have centered on issues such as wages, benefits, and working conditions, further complicate the company’s already tarnished reputation. Workers have accused Maximus of engaging in unfair labor practices and failing to adequately support employees who are tasked with assisting borrowers. If these labor disputes continue to affect employee morale and productivity, it could lead to even worse service for borrowers who are already dealing with a complicated and frustrating loan servicing process. The combination of poor customer service, labor unrest, and executive compensation that seems out of sync with the company’s performance paints a troubling picture for the future of student loan management under Maximus.
The Threat of Reduced Loan Forgiveness and IDR Plans
Adding to the turmoil surrounding the future of student loans is the growing effort by the U.S. government to reduce or even eliminate key student loan forgiveness programs like Public Service Loan Forgiveness (PSLF) and Income-Driven Repayment (IDR) plans. These programs were designed to provide crucial relief for borrowers working in public service or those struggling with debt relative to their income. However, recent reports suggest that the government may look to reduce eligibility for these programs, impose stricter requirements, or completely eliminate them altogether as part of broader fiscal policy adjustments.
The removal of or reductions to these programs would leave borrowers with fewer avenues to manage their debt, potentially increasing default rates and extending the time it takes for borrowers to repay their loans. For individuals in public service jobs or those facing financial hardship, these changes would have a devastating impact on their ability to achieve financial stability and pay down their student loans. If the SBA, with its lack of focus on education finance, inherits this responsibility without reinforcing these programs, borrowers might find themselves in a far worse position than ever before.
Furthermore, this reduction in borrower protections and streamlining of repayment options may also be part of a broader strategy to push more borrowers into private loan options, which could further exacerbate financial hardship for those who are already struggling. With private loans often carrying higher interest rates, less favorable repayment terms, and fewer options for deferral or forgiveness, such a shift would mark a significant pivot towards privatization, benefiting financial institutions while leaving borrowers with even fewer protections and much higher costs.
A Plan to Push Consumers Toward Private Loans?
Many experts are beginning to question whether the government’s plans for overhauling student loan servicing are part of a larger agenda to move borrowers toward private loans. By reducing or eliminating federal loan protections, forgiveness programs, and income-driven repayment options, the government may be attempting to create a vacuum in which private lenders can step in and offer alternative (and likely more expensive) financing options.
This push toward privatization could significantly increase profits for private lenders while making it harder for borrowers to repay their loans. With private loans lacking many of the protections and flexible repayment options offered by federal loans, such a shift could result in higher default rates and greater financial instability for borrowers, particularly for those with already high debt levels.
Conclusion: A New Era of Uncertainty
The transition of student loan servicing to the Small Business Administration represents a significant shift in the federal student loan system, one that could lead to inefficiencies, confusion, and a reduction in protections for borrowers. With agencies like Maximus AidVantage continuing to profit from loan servicing despite failing borrowers, ongoing labor disputes, and a focus on executive compensation over customer service, and the SBA stepping into a complex arena with limited experience, the future of student loan servicing seems fraught with challenges.
The push to reduce or eliminate key student loan forgiveness programs like PSLF and IDR only adds to the uncertainty, leaving millions of borrowers facing a potentially more difficult future. Moreover, the possibility of moving consumers toward private loans with fewer protections and harsher terms would deepen the financial struggles of many borrowers. This move underscores the importance of effective oversight and the need for federal agencies to prioritize the well-being of borrowers over financial interests. The student loan system should be about more than just revenue generation — it should be about supporting borrowers and ensuring that they can achieve financial freedom, not be left trapped in a cycle of debt and frustration. Without proper management, this new era of student loan servicing risks deepening the crisis for millions of Americans who are already struggling to keep up with their education-related debts.
Friday, January 15, 2021
Chasing Carl Barney: My 7-Year Fight for Student Justice and Corporate Accountability (Debbi Potts)
It was July 16, 2012 and I called a meeting with all of my staff. I was the campus director of CollegeAmerica in Cheyenne Wyoming; one of the many campuses owned by Carl Barney. I called the meeting to inform my staff that I was resigning that day. I wanted to let them know before I emailed a resignation letter to Barney and the CEO and COO and left the building.
The Dean of Education (Linda) also resigned that day because of her concerns about the lack of ethics of the company. My exit was abrupt, and my resignation letter called Barney out on the fraud that his organization is infested with. I left without notice and without a job to go to.
I told my staff that there comes a time in most people’s lives where you cannot put your foot over the line and that day had come for me. I could not put my name on one more enrollment agreement or participate in the fleecing of students.
This is my story of the 7-year chase of Carl Barney as he levied a brutal, retaliatory, and relentless plan to silence me.
Who is Carl Barney?
Carl Barney
is a college owner who has turned his private colleges into money making
machines for the benefit of his own wealth. His schools were a toxic blend of
substandard education, outrageously high tuition, and poor outcomes that left
students deep in debt with little to no skills or hope for a better future. The
demographic of most of the students that were solicited to enroll lacked the
ability to succeed; but that did not matter.
Why did I leave the company and how bad was it?
I was so excited to be part of changing student’s lives through education and taking the role of the top administrator of my own campus. Career schools are high priced and fast paced and unfortunately this one was not about the education of students; it was about sales and enrolling students and pulling down as much federal aid as you could to line Barney’s pockets. As time went on it was evident that the company had no regard for oversight of rules or regulations that guide these types of schools; nor had they ever been held accountable for their blatant contempt.
An associate degree was upwards of $40k and a bachelor degree was $78k! The students were solicited through a hard sell of manipulative sales techniques and the education and equipment left much to be desired. The students struggled in 4-week courses where the mid-term was at the beginning of week 3. The faculty who were mostly all adjuncts and were paid less than $10.00 per hour considering the time they put into lecturing, grading papers and coaching students who needed remedial help before they could even comprehend the course materials.
The company was “enrollment driven” with unrealistic goals every month of starting new students. It is called “greed” at the expense of education. Barney’s motto was “We do as we please and ask for forgiveness later.” Accreditation standards were violated throughout the entire system and the students were the ones who suffered.
An example of disregard for regulations
Barney could not operate his company by merely offering a quality education and focusing on students; he always had to have a scheme to entice and enroll students, even if it were a violation of accreditation. He rolled out a free services program where he decided to offer a free certified nursing course to the general public including all of the books, supplies and certification. Sounds amazingly generous..right? Not so fast. This particular course was part of the medical assisting program and Barney believed that once he gave away “free” services, those students would enroll in the full program. The problem was that each of those students had a target on their back and they were heavily recruited to enroll into the full program. There were literally waiting lists of hundreds of potential enrollees across all of the campuses. Barney never bothered to get this stand-alone course approved through accreditation. Since this course was vocational in nature we also were required to track student completion and placement; that never happened.
Accrediting Commission of Career Schools and Colleges (ACCSC), the accrediting agency issued a “cease and desist” of these programs, leaving hundreds and hundreds of students hanging and angry and disillusioned. Campus directors were left on their own to try to explain this deplorable situation to our unsuspecting victims.
What happened next?
Linda and I immediately contacted the Wyoming and Colorado Attorneys Generals offices in order to divulge the numerous issues of consumer fraud that we had witnessed.
I received a personal phone call from Barney a day after my exit. He was definitely on a fishing expedition that was intended to figure out what my plans were moving forward. In that conversation I reported to Barney that the company had owed me $7,000.00 for earned but not paid bonuses. He assured me that he would look into my unpaid bonus. Days went by and I decided to file for lost wages through the Wyoming employment labor board.
On July 21, 2012. I received an email from Barney, and it contained a document entitled “Saying Goodbye” which outlined his theory that you can tell a great deal about the character of people by the way they say goodbye. Additionally, he spewed that he hoped that I had filed a written report within the organization with my concerns about the fraud allegations or I was now a contributor to these allegations of fraud!
I received my bonus in exchange for signing a contract to not disparage the company.
During the months that followed, I was in direct contact with the Attorneys General. In a LinkedIn communication with a former employee of the organization and I asked him to cooperate with the Attorneys General. The employee turned on me and turned the correspondence into Barney. I was sued for an alleged violation of the contract. I represented myself over a two-year period and wrote 75 legal motions to defend myself. I filed a charge with the US Equal Employment Opportunity Commission (EEOC) who took a case against them on my behalf.
It was around that time that I met an attorney from Salt Lake City, Utah who had been enjoined by the US Department of Justice in a qui-tam action with several former employees of Barney’s Utah schools because Barney was illegally paying bonuses to admissions recruiters.
Mr. Bandon Mark, this attorney took my case pro-bono and followed me through depositions and court hearings for several years for the lawsuit, while EEOC pursued Barney in federal court.
The entire purpose of this retaliation by Barney was to punish me and intimidate me into silence…it did not work! The more relentless he became, the more the fraud became public, he would not agree to settle anything, and neither would I.
In May of 2019, a jury of 6 people in a two-day trial awarded Barney $1.00 (instead of the $7,000.00 bonus he was trying to recoup). This was the least amount the jury could give!
The Colorado Attorney General’s office testified on my behalf as an optic to show the jury what this malicious lawsuit was really about. As icing on the cake, EEOC forced Barney to never enforce the illegal contract they had issued me. The contract violated public policy by requiring me to not contact any governmental agencies with grievances against Barney or his schools.
What started out as Barney attempting to make an example out of me for speaking the truth about the fraud in his schools actually opened the doors for me to spend 7 years chasing him.
As a result of this chase, I have been deposed numerous times including a 6-hour videotaped deposition all the while his attorneys spewed venom in my face in an attempt to intimidate me. I was scorned publicly in courtrooms for being a whistleblower…none of that mattered.
Barney’s
feeble attempt to stop me from bringing truth forward only made the chase more
enticing and his fury caused him to make many mistakes including spending
hundreds of thousands of dollars in legal fees against me. His desire to make me pay only served to make
public what he had tried to stop me from saying!
Fruits of my chase:
At the trial where Barney sued me in May 2019; the courtroom was filled with people who got to hear the fraud that Barney had tried to keep silent by suing me! This is in the community where I reside, and community members are now aware of the fraud.
On August 21, 2020, a Colorado Court issued a fraud finding against Barney in a lawsuit where the Colorado Attorney General was the plaintiff, and I was the whistleblower.
I have interviewed with US Department of Justice for an upcoming trial against Barney for illegal bonuses.
I have filed numerous complaints with their accreditor. (ACCSC)
I have interviewed with Veterans Education Success as part of their petition to the VA to cease funding to Barney’s schools.
I have participated in a podcast about my whistleblowing story with Heidi Weber who was responsible for the demise of Globe University with her whistleblowing efforts of their fraud.
I have personally filed a complaint with the Department of Veterans Affairs, Office of Inspector General (VA-OIG).
My story has been covered and publicized by David Halperin in Republic Report. Not just once, but twice.
I have also been
interviewed by David Halperin in Republic Report
Indeed …Barney’s schools are in peril
The following are on-going actions of great consequence:
· The company is on probation with ACCSC and serious question are pending regarding the ability of Barney’s schools to continue to operate as a result of the Colorado Attorney fraud finding.
· The Consumer Financial Protection Bureau (CFPB) is awaiting a court decision to move forward to compel documents related to loan fraud.
· The US Department of Education in tandem with some former employees are in the “discovery stage” of litigation regarding illegal bonuses Barney paid to recruiters.
· Senator Richard Durbin of Illinois has petitioned the United States Department of Education to look at the possibility of suspending federal funds to Barney’s schools.
· Due
to declining enrollment, the lion’s share of Barney’s brick and mortar schools
are closed, leaving only an online school platform which has its own issues
with ACCSC.
I will continue the chase wherever and whenever I can be helpful in fighting the fraud of Carl Barney in order to prevent more students from being harmed.