Democrats press DeVos on oversight of 'shady' student loan companies

Melissa Nann Burke
The Detroit News
Education Secretary Betsy DeVos testifies before the House Education and Labor Committee at a hearing her department's policies Wednesday on Capitol Hill.

Washington — Secretary Betsy DeVos came under fire by House Democrats on Wednesday over her department's oversight of student loan servicing companies and charter schools, as well as her $5 billion proposal to expand school choice. 

DeVos, the Grand Rapids-area school choice advocate, defended the Education Department's policies during a hearing of the House Education and Labor Committee and questioned why four decades of increased federal school spending has produced mediocre academic results compared with the rest of the world.

"Doing the same thing and more of it won't bring about new results," DeVos said. 

Several lawmakers said DeVos has made it harder for states to police the companies responsible for millions of dollars in student loan contracts. 

Rep. Joe Courtney, D-Connecticut, ripped into the secretary over the poor performance of loan servicers, noting the department's internal watchdog had found 61 percent non-compliance in basic functions such as not recording payments from student borrowers and reporting them to credit agencies inaccurately.

"Not only are we seeing this kind of batting average by the department regulating loan servicers, but under your leadership you've taken numerous steps to undermine state enforcement of student borrower protections," Courtney said. 

He referenced a memo by the Education Department in December barring loan servicers from releasing information to state law enforcement officials. 

"Given the fact that state law enforcement has had a spectacular record of success in terms of getting restitution for student borrowers who again have their funds misappropriated, shutting down deceptive practices," Courtney said, "what is the rationale for the department to shut off that flow of information?"

DeVos noted that the concerns raised in the inspector general's report had been addressed and went on to defend the decision to cut off loan servicer data for state officials. 

"Federal student aid is a federal program and to involve involve every single state in a separate oversight capacity really preempts federal—"

But Courtney interrupted to say Congress has never acted to preempt states from carrying out student loan servicing enforcement. 

Democrats also challenged DeVos on her request for $60 million more in funding for charter schools on the heels of a report by an education advocacy group that found the department did not provide effective oversight of states that receive charter school funding.

The same report suggested the government wasted up to $1 billion on charter schools that never opened or quickly closed, including 25 schools in Michigan that received $1.7 million in funding from 2010-15 and never opened. 

Rep. Raúl Grijalva, D-Arizona, pressed DeVos on how the department is monitoring charter schools and what kind of oversight is being done to protect taxpayers' investment. 

"Charter schools are authorized by the states in which they reside, and the programs in which the department interacts with clearly has agreements and has oversight over those particular pieces of the program," DeVos said.

"We know that there have been charter schools haven’t been able to make it and have closed down, and that's good and that’s appropriate," DeVos added. 

"If they can't serve students well, they shouldn't exist. The same should be true of traditional public schools if they can’t operate well."

DeVos also questioned the motives of the report by the advocacy group, the Network for Public Education.

"I'm not sure we can even call it a study," DeVos told freshman Rep. Haley Stevens, D-Rochester Hills. 

"We're looking more closely at it, of course, and anything that is truly waste, fraud or abuse we will certainly address. The reality is that study was really funded by and promoted by those who have a political agenda against charter schools."

DeVos said more than a million students are on waiting lists for charter schools around the country. 

"We want to see more charter schools, not fewer. More students that can access options that are right for them, not fewer," she said. 

"At the expense of public education funding?" Stevens said. 

"Charter schools are public schools," DeVos replied. 

In her opening statement, DeVos touted her school choice initiative and chided lawmakers for increasing federal funding for education 180 percent over 40 years to over $2.2 trillion annually.

Despite that figure, U.S. students rank only 24th in reading, 25th in science and 48th in math when compared with the rest of the world, she said. 

"Great education shouldn't be determined by where you live, nor by who you know. It shouldn't be determined by family income, and education shouldn't be an old-school, one-size-fits-all approach," DeVos said. "That's why I propose something different. Freedom." 

The Education Freedom Scholarships would provide federal tax credits for donations to nonprofit organizations that provide scholarships to school students and not to school buildings themselves, DeVos said.

Rep. Marcia Fudge, D-Ohio, said the proposal would create a "shell game" to fund private and religious schools "using taxpayers as a middle man," adding that the proposal would create a $5 billion revenue hole in the U.S. Treasury. 

"It’s the most ridiculous thing I have ever heard. Once again, it is a voucher, and it is something to benefit the rich," Fudge said. 

"This ‘freedom’ is going to cost us $5 billion a year," she added. "It is nothing more than another attempt to disinvest in public education."

DeVos stressed that the contributions for the scholarships are voluntary and insisted the proposal would take nothing from the budget.

She noted the scholarships could be used to access career or technical opportunities, for transportation or to access "course choice" in small rural schools via online learning.

"The key being that families and students would be empowered to make a choice that fits for them and for their future and what they want to learn and what they want to pursue," DeVos said. 

Rep. Tim Walberg, R-Tipton, tried to help DeVos make her case. "They are tax credits — not vouchers," he said. 

"That's correct," DeVos said. "The proposal is a federal tax credit that individuals or corporations would be able to contribute to, and states would decide whether they wanted to participate or not." 

Walberg and other Republicans also asked DeVos about her proposals to boost career and technical education, and he highlighted his bill to streamline and simplify the financial aid process.

He noted concerns from college administrators that the cumbersome Free Application for Federal Student Aid (FAFSA) form for financial aid can be an obstacle particularly for first-generation and low-income families. 

DeVos noted the introduction of the student aid mobile app that allows students to complete their FAFSA forms on a smartphone, and of recent legislation that would "dramatically" shorten the number of questions on the form itself. 

Rep. Donald Norcross, D-New Jersey, noted recent remarks by DeVos that she’s thankful for the U.S. Supreme Court ruling last year that public employee unions could no longer collect fees from non-members to cover collective bargaining costs.

Norcross demanded to know why free-market groups supported financially by the DeVos family have since backed campaigns trying to persuade teachers to quit their unions.

“In reality, teachers are being targeted, spammed, coerced by groups such as the Mackinac Center for Public Policy — that you probably know something about — and from the Freedom Foundation,” Norcross said.

“If teachers are choosing to join unions — why the two foundations that you’re family’s associated with are the top givers to those groups that are trying to get people to leave? … Why would you do that?”

“Congressman, I’m an advocate for freedom across the board,” DeVos said before launching into a pitch about a proposal to help teachers with professional development.

“I want to make sure you’re answering the question I’m asking,” Norcross interrupted.

DeVos went on: “The proposal that our administration has put forward would allow teachers to determine their own professional development and to take advantage of developing themselves with autonomy and not being assigned to do so by their district or their building or whatever.”  

“What does that have to do with joining unions? They’re not being assigned to join a union,” Norcross said.  

Norcross tried to redirect DeVos to his question: “You took a public position suggesting that joining a union of their own free will was something you didn’t believe in.”

DeVos replied, “I said I was pleased they now have the ability to decide whether or not—”

“They already had that ability, as you know,” Norcross said. “But you through your foundations that you’re associated with have coerced and sent letters, have gone door to door, doing exactly what you said they shouldn’t do.”

“Congressman, when I took this job, I resigned from anything and everything outside of this job,” DeVos said.

“So you no longer believe in that?” Norcross asked.

“I am focused on students, and I’m focused on supporting teachers and great teachers to be able to advance in their jobs,” she said.

“So do you believe in that teachers should have the ability to join a union?” Norcross said.

“Clearly, they should,” DeVos replied, “And they should have the ability to not if they decide not to.”

Norcross continued to press DeVos on whether she believes in supporting foundations that “coerce” teachers to drop out of their union.

“Congressman, I am here for one job,” DeVos said.

Freshman Rep. Andy Levin, D-Bloomfield Township, questioned DeVos about 158,000 students waiting on claims for student-loan forgiveness to be processed by the department after alleging fraud by their colleges.

"I'm gravely concerned, Madam Secretary, these are just some examples of how the department under your leadership has been less concerned with protecting students than with giving cover to profit-driven actors," Levin said. 

He referred to a court order last year that the department acted illegally in delaying an Obama-era rule from 2016 meant to make it easier for defrauded students to receive loan forgiveness.

“Are you aware the (Federal Student Aid) is violating the court order?” Levin asked.

He interrupted DeVos when she began to answer and told the story of a student who had attended a for-profit Corinthian College program, which has since shut down, and who got incorrect information from the department about placing her loans in forbearance.

“Do you know how many other borrowers the FSA has illegally ordered collections on, in addition to her?” Levin asked.

“We need to work very diligently on the whole borrower-defense claims issue. We have, as I said, almost 48,000 that have been approved,” DeVos said.

Levin pressed DeVos for a figure of students incorrectly collected on.

“That’s not a category that I would, uh—” DeVos said.

“I wish you would keep track of that category, Madam Secretary. That would be super for the students of this country,” Levin said.

He raised a concern about institutions that have attempted to enforce pre-dispute arbitration agreements against students with borrower-defense claims.

“Do you commit to revoking the eligibility of schools that rely on pre-dispute arbitration agreements, which are not allowed under the regulations?” Levin asked.

“We are continuing to address the applications made both by students that have been part of closed schools and by those who are submitting claims,” DeVos said.