A Barack Obama-era enforcement unit dismantled by the Donald Trump administration is being resurrected at the Education Department to investigate colleges engaging in fraud and abuse of federal student aid.
Reestablishing the unit, created in 2016, signals that the Biden administration will resume Obama-era efforts to root out abuses at for-profit colleges, a campaign criticized by Republicans and one that led to the demise of the unit.
Before Trump entered office, the enforcement team, including lawyers and investigators, was probing deceptive recruitment and marketing practices at a number of for-profit schools, including those owned by DeVry Education Group (now known as Adtalem Global Education).
The DeVry investigation ended shortly after Trump took office, and months later his education secretary, Betsy DeVos, named Julian Schmoke Jr., a former DeVry University dean with no legal or investigative expertise, to lead the student-aid enforcement unit.
By May 2018, the New York Times reported that members of the unit had been reassigned or instructed to focus on smaller compliance cases and processing debt-forgiveness applications. Investigations went dark. And a unit once staffed with dozens of attorneys was left with three.
The department denied that Schmoke had any influence on the unit’s work and said that the reshuffling of duties did not undermine its oversight of colleges.
Congressional Democrats were incensed and accused DeVos of capitulating to the for-profit industry. At a hearing in 2018, Sen. Richard J. Durbin (D-Ill.) grilled DeVos for gutting the unit to the detriment of students.
On Friday, Durbin hailed the restoration of the enforcement team.
“Reestablishing an aggressive enforcement office at the Department of Education is key to holding for-profit colleges accountable and protecting students and taxpayers,” Durbin said in an email. “For-profit colleges essentially ran the Department for four years under Donald Trump and Betsy DeVos. With this announcement, President Biden and Secretary [Miguel] Cardona are making clear that those days are over.”
Republican leaders assailed the Federal Student Aid program for reviving a unit they say blatantly and unfairly targeted for-profit schools.
“This shameful attempt by FSA to cherry-pick who receives protection is emblematic of an administration blinded by partisanship,” said Virginia Foxx (N.C.), the top Republican on the House Education Committee. “Every student deserves effective protections. FSA should improve its operations so that all educational pathways are treated equally.”
The enforcement unit will consist of four divisions.
The investigations division will collaborate with state and federal authorities to examine potential misconduct or high-risk behavior by colleges and their third-party partners, according to the department.
Another division will handle terminations, suspensions and appeals, while a third group will resolve school disputes. The unit will also manage debt-relief claims made through the borrower defense to repayment program. Students are entitled to a discharge of their debt when their college uses illegal and deceptive tactics to persuade them to borrow.
Kristen Donoghue, the former enforcement director at the Consumer Financial Protection Bureau during the Obama administration, has been tapped to run the unit. She will report to Richard Cordray, chief operating officer of the Office of Federal Student Aid and Donoghue’s former boss at the bureau.
At the CFPB, Donoghue led a team of 140 people that pursued hundreds of investigations and filed many enforcement actions against a range of financial services companies.
“Kristen brings a strong enforcement track record to this role,” Cordray said. “Her experienced leadership will drive greater accountability for schools and better educational outcomes for the students we serve.”
The enforcement unit will face scrutiny from consumer advocates, lawmakers and industry groups. The Education Department has an enduring reputation of being light on oversight and slow to act, even when there are glaring signs of distress, advocates and liberal lawmakers say.
For-profit colleges, meanwhile, are eager to avoid what many considered a politicized attack on the sector under Obama.
“We have a concern that, like happened under Obama, this effort at enforcement may only look at for-profit schools,” said Jason Altmire, chief executive of Career Education Colleges and Universities, which represents for-profit colleges. “Any effort to scrutinize financial aid should include all schools in all sectors because all students deserve protection and all schools should be held accountable.”
Critics of the sector say it requires heightened oversight because of disproportionately bad outcomes for students who too often are given false promises and left with high debt loads for worthless credentials. Altmire said that while there have been bad actors, the industry is not a monolith and has far more stories of success than failure.
David Halperin, a consumer attorney who has been critical of the for-profit industry, said for-profit colleges remain at the root of an overwhelming number of student and whistleblower complaints to federal and state authorities about abusive practices.
“What’s needed now is more resources, so the new enforcement team can investigate and hold its own against the armies of lawyers that predatory colleges will deploy,” Halperin said.