Will Maximus and Its Subsidiary AidVantage See Cuts?

Maximus Inc., the parent company of federal student loan servicer Aidvantage, is facing growing financial and existential threats as the Trump administration completes a radical budget proposal that would slash Medicaid by hundreds of billions of dollars and cut the U.S. Department of Education in half. These proposed changes could gut the very federal contracts that have fueled Maximus's revenue and investor confidence over the last two decades. Once seen as a steady player in the outsourcing of public services, Maximus now stands at the edge of a political and technological cliff.

The proposed Trump budget includes a plan to eliminate the Office of Federal Student Aid and transfer the $1.6 trillion federal student loan portfolio to the Small Business Administration. This proposed restructuring would remove Aidvantage and other servicers from their current roles, replacing them with yet-unnamed alternatives. While Maximus has profited enormously from servicing loans through Aidvantage—one of the major federal loan servicers—it is unclear whether the company has any role in this new Trump-led student loan regime. The SBA, which lacks experience managing consumer lending and repayment infrastructure, could subcontract to politically favored firms or simply allow artificial intelligence to replace human collectors altogether.

This possibility is not far-fetched. A 2023 study by Yale Insights explored how AI systems are already outperforming human debt collectors in efficiency, compliance, and scalability. The report examined the growing use of bots to handle borrower communication, account resolution, and payment tracking. These developments could render Maximus’s human-heavy servicing model obsolete. If the federal government shifts toward automated collection, it could bypass Maximus entirely, either through privatized tech-driven firms or through internal platforms that require fewer labor-intensive contracts.

On the health and human services side of the business, Maximus is also exposed. The company has long served as a contractor for Medicaid programs across several states, managing call centers and eligibility support. But with Medicaid facing potentially devastating cuts in the proposed Trump budget, Maximus’s largest and most stable contracts could disappear. The company’s TES-RCM division has already shown signs of unraveling, with anonymous reports suggesting a steep drop-off in clients and the departure of long-time employees. One insider claimed, “Customers are dropping like flies as are longtime employees. Not enough people to do the little work we have.”

Remote Maximus employees are also reporting layoffs and instability, particularly in Iowa, where 34 remote workers were terminated after two decades of contract work on state Medicaid programs. Anxiety is spreading across internal forums and layoff boards, as workers fear they may soon be out of a job in a shrinking and increasingly automated industry. Posts on TheLayoff.com and in investor forums indicate growing unease about the company’s long-term viability, particularly in light of the federal budget priorities now taking shape in Washington.

While Maximus stock (MMS) continues to trade with relative strength and still appears profitable on paper, it is increasingly reliant on government spending that may no longer exist under a Trump administration intent on dismantling large parts of the federal bureaucracy. If student loan servicing is eliminated, transferred, or automated, and Medicaid contracts dry up due to funding cuts, Maximus could lose two of its biggest revenue streams in a matter of months. The company’s contract with the Department of Education, once seen as a long-term asset, may become a political liability in a system being restructured to reward loyalty and reduce regulatory oversight.

The question now is not whether Maximus will be forced to downsize—it already is—but whether it will remain a relevant player in the new federal landscape at all. As artificial intelligence, austerity, and ideological realignment converge, Maximus may be remembered less for its dominance and more for how quickly it became unnecessary.

The Higher Education Inquirer will continue tracking developments affecting federal student loan servicers, government contractors, and the broader collapse of the administrative state.

Triumphalism in Decline: A Critique of “They Attack Because We’re Strong”

In his recent Inside Higher Ed opinion piece, “They Attack Because We’re Strong,” Frank Fernandez argues that American higher education is under fire not because it is failing, but because it is too powerful and influential. He calls for a long-view perspective that celebrates the accomplishments of U.S. colleges and universities over the past century. But his essay—well-intentioned as it may be—reads less as a sober reflection and more as institutional nostalgia, untethered from the brutal realities of the present.

Fernandez’s triumphalism overlooks or distorts several truths. It is true that U.S. universities have had moments of undeniable achievement: scientific breakthroughs, professional training, and expansion of access. But to say “higher education won” is to ignore the hollowing out of public trust, the corporatization of academia, and the structural harm inflicted on millions of students and contingent workers. If this is victory, it has come at a staggering cost.

“Higher Education Won”? Who Lost?

One of the glaring absences in Fernandez’s narrative is any sustained acknowledgment of the student debt crisis—more than $1.7 trillion in outstanding loans that have left borrowers in financial limbo for decades. The author does not address how rising tuition, stagnating wages, and declining public investment have turned the promise of higher education into a burden for the working class and communities of color.

Nor does he wrestle with the implications of an adjunct majority workforce. Most college instructors today work under precarious contracts with little pay, no benefits, and no job security. This is not a sign of institutional strength. It is a labor crisis.

The rhetorical move to compare today’s struggles with the early 20th century glosses over the fact that the institutions that once expanded access are now increasingly exclusionary. Public flagships and elite privates alike are doubling down on selectivity, building billion-dollar endowments, and investing in luxury amenities while cutting humanities departments and hiking student fees.

If the past 100 years have brought expansion, the past 20 have brought erosion.

Legitimacy Cannot Be Willed into Being

Fernandez concedes that “our challenge in this new era is primarily one of legitimacy.” But he frames this as a problem of perception, not performance. He cites faculty critiques over gendered language in a voter turnout study as a distraction, implying that the real work of the academy is hindered by too much internal debate. But that line of thinking presumes that legitimacy can be restored by tone and unity, not by systemic reform.

Legitimacy is not gained by declaring relevance—it is earned through material impact. That means resisting extractive tuition models, ending the abuse of contingent labor, and seriously confronting how the industry has facilitated racial and economic stratification.

It also means acknowledging that some of the conservative critiques—about administrative bloat, about ideological insularity, about weak accountability mechanisms—are not entirely without merit. These issues are not the inventions of “Trump acolytes,” but of decades of elite capture and mission drift.

A House Divided

Perhaps most troubling is Fernandez’s call for national solidarity among faculty and institutional leaders, modeled after the early AAUP. But today’s higher education system is profoundly stratified. Community colleges face declining enrollments and funding cliffs. HBCUs and regional publics have long been underresourced. For-profit colleges exploit the most vulnerable. And elite institutions continue to hoard wealth and status.

There is no shared struggle here. There is no unified front. The idea that faculty from a state university in Texas or an adjunct at a California community college share the same institutional mission as leadership at Princeton or Stanford is a comforting illusion. Solidarity will not emerge without reckoning with this inequality.

Conclusion

Fernandez asks us to see the attacks on higher ed as a signal of strength. But what if these attacks are, in part, the result of decades of institutional failure? What if irrelevance is not imposed from the outside but cultivated from within—through inaccessibility, arrogance, and systemic exploitation?

If higher education is to have a future worth defending, it will require more than collective nostalgia and appeals to tradition. It will require a commitment to equity, transparency, and accountability—not just to the ideals of the past, but to the people failed by the system today.

Sources:

• U.S. Department of Education. “Student Loan Portfolio Summary.” Federal Student Aid.

• AAUP. “Data Snapshot: Contingent Faculty in US Higher Ed.”

• Center for American Progress. “The Cost of Cuts: A Look at the Ongoing Crisis in Public Higher Education.”

• Georgetown University CEW. “The College Payoff.”

• The Century Foundation. “How Public Colleges Have Been Undermined.”

• National Center for Education Statistics (NCES). Integrated Postsecondary Education Data System (IPEDS).

Need Student Debtors to Provide Information about Low-Financial-Value Postsecondary Programs (Updated February 15, 2023)

 

[Editor's Note: The public comment period ended February 10, 2023.]  

The US Department of Education is accepting public comments as a Request for Information (RFI) about "Public Transparency for Low-Financial-Value Postsecondary Programs."  The announcement is available at the US Federal Register.  

The URL to make these comments is at 

https://www.regulations.gov/document/ED-2022-OUS-0140-0001

As with most US government rules and policies, industry insiders have great influence in these decisions--and concerned citizens are often shut out of the process. When consumers do have a chance to speak, they may not even know of those opportunities.  That's why the Higher Education Inquirer is asking student loan debtors to contribute to this RFI while they can.   

Tell DC policymakers and technocrats about your unique struggles (and your family's struggles) tied to student debt--and what could be done to better inform consumers like you. 

There you can find public comments that have already been made.  As of February 15, only 129 comments were posted. 

According to the announcement: 

"a misalignment of prices charged to financial benefits received may cause particularly acute harm for student loan borrowers who may struggle to repay their debts after discovering too late that their postsecondary programs did not adequately prepare them for the workforce. Taxpayers also shoulder the costs when a substantial number and share of borrowers are unable to successfully repay their loans. The number of borrowers facing challenges related to the repayment of their student loans is significant."  

The Request for Information continues...

"Programs that result in students taking on excessive amounts of debt can make it challenging for students to reach significant life milestones like purchasing a home, starting a family, or saving enough for retirement, ultimately undermining their ability to climb the economic mobility ladder. Especially for borrowers who attended graduate programs, debt-to-income ratios often rise well above sustainable levels. IDR (Income-Driven Repayment) plans also cannot fully protect borrowers from the consequences of low financial-value programs. For instance, IDR plans cannot give students back the time they invested in such programs. For many programs, the cost of students' time may be at least as significant as direct program costs such as tuition, fees, and supplies. Loans will also still show up on borrowers' credit reports, including any periods of delinquency or default prior to enrollment in IDR."

"The Biden-Harris Administration is committed to improving accountability for institutions of higher education. One component of that work is to increase transparency and public accountability by drawing attention to the postsecondary programs that are most likely to leave students with unaffordable loans and provide the lowest financial returns for students and taxpayers."

CECU, an group representing for-profit colleges, has an organized effort to protect its interests. 
 

Meanwhile, Robert Kelchen has provided an EXCEL spreadsheet that provides many answers. The dataset covers 45,971 programs at 5,033 institutions with data on both student debt and earnings for those same cohorts. We found more than 12,200 programs where debt exceeds income. And more than 7200 programs resulted in median incomes of less than $25,000 a year with debt greater than $10,000.

While some of these high-debt programs in medicine and law may eventually be profitable, many more paint a picture of struggle with a lifetime of debt peonage. Cosmetology schools had a large number of low-income programs.  But the fine arts, humanities, social sciences, and education also produced low-value programs in terms of debt to income ratio. 

Some of subprime schools HEI has been investigating (Purdue University Global, University of Arizona Global, The Art Institutes) had a number of low-value majors. But elite and brand name schools like Duke, Drexel, Emory, Syracuse, Baylor, DePaul, New School, and University of Rochester even have high debt and low-income programs. 

Related link:  I Went on Strike to Cancel My Student Debt and Won. Every Debtor Deserves the Same. (Ann Bowers)

Related link: More Transparency About the Student Debt Portfolio Is Needed: Student Debt By Institution

Related link: The College Dream is Over (Gary Roth)

Related link: Even Elite Schools Have Subprime Majors (Keil Dumsch and Dahn Shaulis)

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:

1. Salaries and Expenses
2. 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:

1. https://www.linkedin.com/posts/preston-cooper-479331a4_the-congressional-budget-office-cbo-released-activity-7209166019871809536-8vM2
2. https://www.farmers.gov/sites/default/files/2021-10/usda-farmloans-factsheet-10-20-2021.pdf
3. https://www.cbo.gov/publication/59499
4. https://studentaid.gov/sites/default/files/fy2024-fsa-annual-report.pdf
5. https://www.ed.gov/media/document/w-seoverviewpdf-39165.pdf
6. https://www.forbes.com/sites/prestoncooper2/2024/06/19/cbo-cost-of-federal-student-loans-nears-400-billion/
7. https://budget.house.gov/press-release/via-forbes-cbo-cost-of-federal-student-loans-nears-400-billion
8. https://www.fsa.usda.gov/resources/programs/farm-operating-loans
9. https://www.opm.gov/healthcare-insurance/flexible-spending-accounts/
10. https://crsreports.congress.gov/product/pdf/R/R46143
11. https://edworkforce.house.gov/uploadedfiles/2.5.25_cooper_testimony_house_ed_and_workforce_final.pdf
12. https://studentaid.gov/data-center/student/portfolio
13. https://www.agcredit.net/loans/beginning-farmer-loans/fsa-loans
14. https://www.oklahomafarmreport.com/okfr/2025/01/07/usda-increases-funding-for-new-specialty-crop-program-reminds-producers-of-upcoming-deadlines/
15. https://www.crfb.org/blogs/student-loans-cost-340-billion-more-expected
16. https://farmdoc.illinois.edu/wp-content/uploads/2022/09/USDA-FSA-Your-Guide-to-Farm-Loans.pdf
17. https://www.cbo.gov/publication/59946
18. https://gaswcc.georgia.gov/document/document/microloans-fact-sheet-aug-2019/download
19. https://www.cbo.gov/publication/60682
20. https://www.farmraise.com/blog/fsa-loan-types
21. https://www.cbo.gov/publication/60713
22. https://www.fsa.usda.gov/programs-and-services/farm-loan-programs/farm-operating-loans
23. https://www.cato.org/briefing-paper/ending-federal-student-loans
24. https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2022-2023/vol3/ch2-cost-attendance-budget
25. https://www.congress.gov/crs-product/R43571
26. https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2023-2024/vol3/ch2-cost-attendance-budget
27. https://sustainableagriculture.net/publications/grassrootsguide/credit-crop-insurance/direct-and-guaranteed-farm-loans/
28. https://www.ed.gov/sites/ed/files/about/overview/budget/budget24/summary/24summary.pdf
29. https://studentaid.gov/sites/default/files/fy2023-fsa-annual-report.pdf
30. https://bipartisanpolicy.org/explainer/federal-student-aid-an-overview/
31. https://www.ed.gov/about/ed-organization/functional-statements/fsa-functional-statements/finance
32. https://www.pgpf.org/our-national-debt/
33. https://www.cbo.gov/publication/60419
34. https://www.mercatus.org/research/data-visualizations/cbo-export-import-bank-fha-mortgage-guarantees-and-doed-student-loan
35. https://www.crfb.org/papers/analysis-cbos-march-2024-long-term-budget-outlook

What now for the US Department of Education?

What happens now with the US Department of Education now that Elon Musk claims that it no longer exists? It's hard to know yet, and even more difficult after removing career government workers that we have known for years.  

We are saddened to hear of contacts we know who have been fired: hard working and capable people, in an agency that has been chronically understaffed and politicized. 

We also worry for the hundreds of thousands of student loan debtors who have borrower defense to repayment claims against schools that systematically defrauded them--and have not yet received justice. 

And what about all those FAFSA (financial aid) forms for students starting and continuing their schooling? How will they be processed in a timely manner?

Without funding and oversight, the Department of Education looks nearly dead. But with millions of poor and disabled children relying on Title I funding and IDEA and tens of millions more with federal student student loans, it's hard to imagine those functions disappearing for good.  

Let's see how much slack is taken up by private enterprise and religious nonprofits who may benefit from the pain. With student loans, much of the work has already been contracted out. It would not be out of the question for the student loan portfolio to be sold off to corporations who could profit from it. And that may or may not require Congressional approval.  

Coronavirus and the College Meltdown

The College Meltdown continues in 2020. This phenomenon is deeper than the coronavirus, the temporary closing of campuses across the US, and the cancellation of NCAA basketball's March Madness. What we are seeing in the news should be a smaller entry in the History of American Higher Education compared to larger trends and social problems that preceded the pandemic.

College and university enrollment has been declining slowly but constantly since 2011, with for-profit colleges and community colleges taking the largest hits. And it follows larger demographic trends which include a half century of increasing inequality, including "savage inequalities" in the K-12 pipeline, crushing student loan debt, decreasing social mobility and the underemployment of college graduates, smaller families, and the hollowing out of America.

Spending on college is also an increasingly risky decision for working families.

[College enrollment continues to decline every year. This chart is already outdated. In Alaska, for example, enrollment dropped 37 percent from 2011 to 2019, New Mexico and Michigan dropped 33 and 24 percent. ]

A larger enrollment decline is projected for 2026, a ripple effect of the Great Recession of 2008. With fewer younger people to attend college, this "enrollment cliff" could amount to a 15 percent drop in a single year.

There are many parts to the current Coronavirus crisis and its effects on US higher education. But they all boil down to the Trump mantra (defund, deregulate, and privatize) and the opportunity for the elites to capitalize from the crisis, as they did during and after the Great Recession.

[Image below from Wikipedia. Higher education in the US has increasingly relied on for-profit mechanisms for growth and revenues. This includes privatized housing and services and for-profit Online Program Managers (OPMs).]

Higher education is a small but significant part of the US economy, which includes much larger sectors like Health Care and Finance. While the working class will not get bailed out, these sectors likely will, with the sudden crisis used as a rationalization. The crisis of crushing student loan debt and the much larger problems related to 50 years of growing inequality may be more disruptive in the long run, but these matters continue to be ignored.

Whether the next President is Donald Trump or Joe Biden, things could get worse for working families, unless there is mass resistance--right now I don't see that happening. For the moment, many young people are responding by living with family, not going to college, and delaying child bearing. Those who do get an education are also making economic sacrifices. Some, for example are selling their bodies as Sugar Babies to get through school.

Many state economies also look bleak in the near future. Not enough in revenues and increasing Medicaid costs make investments in education difficult to do without increasing taxes or state-level debt. And it's not likely that the wealthy will be willing to pay their fair share, unless they feel economically threatened. If that happens, rich companies and rich people can just move out of state or out of the country.

Higher Education and the Student Loan Mess

In October 2019, Trump Department of Education official Wayne Johnson resigned, recognizing that student loan debt mess was worse than anyone had imagined. US higher education enrollment is supposed to be countercyclical (improving when the economy drops) , but don't bet on it without government help.

Haven't heard any rumors in months, but it should also be interesting to see if President Trump tries to unload the $1.5T in federal loans to his banking friends using an executive order. McKinsey & Company have been tasked to determine the possibilities of such a maneuver, but there is radio silence on that front.

In the education sector, I'm watching student loan servicers and private lenders Sallie Mae (SLM), Navient (NAVI), and Nelnet (NNI) closely. Student Loan Asset-Backed Securities (also known as SLABS) are also worthy of scrutiny given the low rates of student loan repayment.

Newest Links

• Latest Coronavirus News (Inside Higher Education)
• Moody's lowers higher ed outlook to negative amid coronavirus crisis (Jeremy Bauer-Wolf, Education Dive)
• What Is a College Education in the Time of Coronavirus? (NY Times Opinion)
• Community Colleges and the Coronavirus (Madeline St. Amour, Inside Higher Education) 
• California AG sues Betsy DeVos for overturning Obama-era rule aimed at for-profit colleges (Aarthi Swaminathan, Yahoo Finance)
• Coronavirus and Admissions Fears (Scott Jaschick, Inside Higher Education)
• Already stretched universities now face huge endowment losses from market meltdown (PBS, Jon Marcus)
• Uncertain Fate for Support Staff (Lilah Burke, IHE)
• 41% of Recent Grads Work in Jobs Not Requiring a Degree (Inside Higher Education)
• College Students Losing SNAP Benefits (Inside Higher Education)
• New Jersey Passes Contingent Faculty Bill of Rights (The Adjunct Crisis)
• Many Nonprofit College Programs Would Fail Gainful Test (Inside Higher Education)
• The College Wealth Premium Has Collapsed (Annie Lowrey, The Atlantic)
• Trump DOJ Compels NACAC to Soften Ethics for College Admissions (Inside Higher Education)
• Student Debt Is Transforming the American Family (Hua Hsu, New Yorker)
• Community college enrollment down 25% nationally since 2011, Census Bureau estimates (Cleveland.com)
• Break Up the BA Cartel (Frederick M. Hess, National Review)
• Wealthy Students' Borrowing Spikes (Rick Seltzer, Inside Higher Education)
• Behind Closed Doors in Washington, Here’s What Colleges Fight For (Kevin Carey, NY Times)
• Preparing for the Great Enrollment Crash (Inside Higher Education)
• List of 946 Financial Ailing Colleges Kept Secret (Inside Higher Education)
• How Colleges Can Survive the Coming Enrollment Crash (Rob Jenkins, James G. Martin Center)
• Colleges, face up to the rocky financial reality (CNN opinion)
• Trump education official to resign and call for mass student loan forgiveness (Josh Mitchell, Wall Street Journal)
• Worst Colleges in America, By State
• Colleges Ill-prepared for the Future (Inside Higher Ed)
• Has the Chamber of Commerce Hijacked YOUR Education System? Engineering Students For A Low-Wage, Gig Economy (Wrench in the Gears)
• The Educated Underclass (Gary Roth)
• Sallie Mae execs tan at Maui retreat while student debt crisis tops $1.6 trillion (NBC News Investigates)
• Flagship Universities are Unaffordable to Most Citizens (IHEP)
• 99% Rejected For Student Loan Forgiveness - Again (Zack Friedman, Forbes)
• The other victims when colleges decline or close: their hometowns (Hechinger Report)
• HBCUs Plan Cuts After Congress Misses Funding Deadline (Inside Higher Education)
• Trump Administration Hires McKinsey to Evaluate Student-Loan Portfolio (Wall Street Journal)
• Campus Facilities Facing Debt Crisis and Staffing Cuts (Sightlines)
• TCF Analysis of 70+ University-OPM Contracts Reveals Increasing Risks to Students, Public Education
• DOWNFALL OF NCAA WOULD IMPROVE AMERICAN EDUCATION (Randall Collins)

When Banks Lost Control of the Student Loan Mess

History can be many things. It can be both informative and purposely deceptive. And from time to time, historical events need to be revisited if we seek the truth. We also find critical historical analysis essential when we think about US higher education and student loan debt from a People's perspective.

In a previous article we said Best and Best's classic The Student Loan Mess needed to be updated and reexamined. Although the book was an exceptional chronicle of the student loan industry from 1958 to 2013, it missed at least one key event, the 2008-2010 bailout of Sallie Mae and a number of banks who made questionable private loans guaranteed by the US government. This lesson is especially important if the US government decides to get out of the student loan business or reduce government oversight of student loans.

From 1965 to 2010, the federal government was a backstop for private student loans, Guaranteed Student Loans, also known as the FFEL loans. Annual volume of private loans skyrocketed, from $5B in 2001 to over $20B in 2008, when 14 percent of all undergraduates had one. A secondary market for private student loan debt (student loan asset-backed securities) also began to flourish. An industry group, America's Student Loan Providers (ASLP), provided political cover for private lenders.

In 2007, President George W. Bush signed the College Cost Reduction and Access Act of 2007 (HR 2669) which cut subsidies to lenders and increasing grants to students. But this did little to contain the growing mountain of student loan debt. A mountain of unrecoverable debt that was crushing millions of consumers as the US was facing an enormous economic crisis, the Great Recession.

In rereading The Student Loan Mess, we also discovered that these private entities had not only made questionable loans, some private lenders had also bribed university officials to become preferred lenders. How commonplace this student loan grift was has not been adequately explored.

In 2008, the Bush government began a bailout of these private lenders, the Ensuring Continued Access to Student Loans Act (ECASLA), which amounted to $110B. This event occurred largely without notice. And because a larger Great Recession was happening, the ECASLA never received much media attention.

As part of Health Care and Education Reconciliation Act of 2010, President Obama's takeover of the Guaranteed Student Loan program in 2010, did get attention. Ending the Guaranteed Student Loan program was supposed to save the US government $66B over an 11-year period. This rosy projection never materialized. The FFEL loans acquired by the U.S. Department of Education (ED) during the transition to the Direct Loan program are now part of the Direct Loan portfolio. The U.S. Department of Education (ED) acquired an additional $20.4 billion in face amount of FFEL loans from lenders during the transition from the FFEL program to the Direct Loan program.

The FFEL loans that were not acquired by the U.S. Department of Education (ED) during the transition to the Direct Loan program remained with the original private lenders. These loans continue to be serviced by the private lenders that issued them.

For-profit colleges, the engine for much of this bad debt, did get scrutiny, and from 2010 to 2023, their presence was reduced. But overpriced education and edugrift continued in many forms. And after a short respite from 2020 to 2024, the mountain of bad student loan debt continues to grow.

Related links:

A Report on the Loan Purchase Programs Created by ECASLA

Student Loan Debt Clock

America's Student Loan Providers | C-SPAN.org

Student Loan History (New America)

What do the University of Phoenix and Risepoint have in common? The answer is a compelling story of greed and politics.

In the increasingly commodified world of higher education, the University of Phoenix and Risepoint (formerly Academic Partnerships) represent parallel tales of how private equity, political influence, and deceptive practices have shaped the online college landscape. While their paths have diverged in branding and institutional affiliation, the underlying motives and outcomes share disturbing similarities.

---

The University of Phoenix: A Legacy of Legal and Ethical Trouble

The University of Phoenix (UOP) has been a central player in the for-profit college boom, particularly during and after the 2000s. Under the ownership of Apollo Education Group, and later the Vistria Group, UOP has faced a relentless stream of lawsuits, regulatory scrutiny, and public outrage.

In 2019, the Federal Trade Commission (FTC) reached a $191 million settlement with UOP over allegations of deceptive advertising. UOP falsely claimed partnerships with major corporations like Microsoft, AT&T, and Twitter to entice students. The result was $50 million in restitution and $141 million in student debt relief.

But the legal troubles didn’t stop there. In 2022 and 2023, the U.S. Department of Education included UOP in a broader class action that granted $37 million in borrower defense discharges. These claims stemmed from deceptive marketing and predatory recruitment practices.

Meanwhile, in 2024, the California Attorney General settled with UOP for $4.5 million over allegations of illegally targeting military service members between 2012 and 2015. The university’s controversial relationship with the military community also led to a temporary VA suspension of GI Bill enrollments in 2020.

The legal history includes False Claims Act suits brought by whistleblowers, including former employees alleging falsified records, incentive-based recruiter pay, and exaggerated graduation and job placement statistics. In 2019, Apollo Education settled a securities fraud lawsuit for $7.4 million.

More recently, UOP has been embroiled in political controversy in Idaho. In 2023 and 2024, the Idaho Attorney General challenged the state's attempt to acquire UOP, citing Open Meetings Act violations and lack of transparency. Though a federal judge initially dismissed the suit, Idaho’s Supreme Court allowed an appeal to proceed.

Through all of this, Vistria Group—UOP’s private equity owner since 2017—has reaped massive profits. Vistria was co-founded by Marty Nesbitt, a close confidant of Barack Obama, underscoring the bipartisan political protection that shields for-profit education from lasting accountability.

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Risepoint and the Online Program Management Model

Risepoint, formerly Academic Partnerships (AP), tells a similarly troubling story, albeit from the Online Program Manager (OPM) side of the education-industrial complex. Founded in 2007 by Randy Best, a well-connected Republican donor with ties to Jeb Bush, AP helped universities build online degree programs in exchange for a significant cut of tuition—sometimes up to 50%.

This tuition-share model, though legal, has raised ethical red flags. Critics argue it diverts millions in public education dollars into private hands, inflates student debt, and incentivizes aggressive, misleading recruitment. The most infamous case was the University of Texas-Arlington, which paid AP more than $178 million over five years. President Vistasp Karbhari resigned in 2020 after it was revealed he had taken international trips funded by AP.

Risepoint was acquired by Vistria Group in 2019, placing it in the same portfolio as the University of Phoenix and other education businesses. The firm’s growing influence in higher education—fueled by Democratic-aligned private equity—reflects a deeper entanglement of politics, policy, and profiteering.

In 2024, Minnesota became the first state to ban new tuition-share agreements with OPMs like Risepoint. This legislative action followed backlash from a controversial deal between Risepoint and St. Cloud State University, where critics accused the firm of extracting excessive revenue while offering questionable value.

Further pressure came from the federal level. In 2024, Senators Elizabeth Warren, Sherrod Brown, and Tina Smith issued letters to major OPMs demanding transparency about recruitment tactics and tuition-share models. The Department of Education followed in January 2025 with new guidance restricting misleading marketing by OPMs, including impersonation of university staff.

Despite this, Risepoint continued expanding. In late 2023, the company purchased Wiley’s online program business for $150 million, signaling consolidation in a turbulent industry. Yet a 2024 report showed 147 OPM-university contracts had been terminated in 2023, and new contracts fell by over 50%.

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What Ties Them Together: Vistria Group

Vistria Group sits at the center of both sagas. The Chicago-based private equity firm has made education—especially online and for-profit education—a core pillar of its investment strategy. With connections to both Democratic and Republican power brokers, Vistria has deftly navigated the regulatory landscape while profiting from public education dollars.

Its ownership of the University of Phoenix and Risepoint demonstrates a clear strategy: acquire distressed or controversial education companies, clean up their public image, and extract revenue while avoiding deep reforms. Through Vistria, private equity gains access to billions in federal student aid with minimal oversight and a bipartisan shield.

The result is a higher education ecosystem where political influence, corporate profit, and public exploitation collide. And whether through online degrees from the University of Phoenix or public-private partnerships with Risepoint, students are often the ones left bearing the cost.

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As scrutiny intensifies and state and federal lawmakers demand reform, the futures of Risepoint and the University of Phoenix remain uncertain. But one thing is clear: their shared story reveals how higher education has become a battleground of greed, power, and politics.