Updated with response from Education Department.
Their appointments come as the Education Department has extended the deadline for career schools and community colleges that provide vocational training to submit appeals under the gainful employment rule. The controversial regulation threatens to withhold federal financial aid from institutions whose graduates are unable to earn enough to repay their student loans.
For-profit colleges have lobbied against the rule for years, arguing that it unfairly targets the sector and would ultimately hurt the low-income students they educate. Their protests fell on deaf ears during the Obama administration, but the Trump administration and congressional Republicans have taken up the cause with promises to roll back the rule.
In her letter, Warren questions the timing of the extension and Hansen’s hiring because he lobbied against the gainful rule, according to the Senate Office of Public Records Lobbying Disclosure databases. She said his “recent employment history clearly calls into question his impartiality in dealing with higher education issues at the Department of Education, and raises alarming conflicts of interest concerns.”
Hansen, she added, also may have other conflicts of interest related to the student loan program because his father, Bill Hansen, is president of United Student Aid Funds, a company that collects education debt. The company, now known as Strada Education Network, is suing the Education Department for barring it from charging people in default fees of up to 16 percent of the principal and accrued interest owed on the loans. The lawsuit is now moot because the department revoked its own guidance on the issue last week.
Education Department spokesperson Jim Bradshaw said Hansen resigned on Friday, which Bloomberg first reported on Monday. Bradshaw said Hansen served “without conflict and decided his service had run its course.”
Trump signed an executive order in January that requires political appointees to abstain from involvement in matters related to their former employer or clients, including regulations and contracts, for two years.
But Warren said the appointment of Hansen and Eitel, coupled with recent announcements at the education agency, “call into question whether the Department of Education is adequately complying” with Trump’s order.
The Education Department contends that Eitel consulted with the ethics officer at the agency before he agreed to join the department, and has had several follow up meetings since then. Eitel has recused himself from any matters involving Bridgepoint, including anything related to the gainful rule, according to the department.
Eitel worked at Bridgepoint, owner of Ashford University and the University of the Rockies, when the company agreed to a $32 million settlement with the Consumer Financial Protection Bureau. The watchdog agency made the company refund and discharge $24 million in debt that students accumulated through an in-house loan program that allegedly misled borrowers about the total cost of the loans.
In February, the Education Department’s inspector general determined that Bridgepoint owes the department a $300,000 fine for miscalculating the refund of federal aid provided to Ashford students, according to a regulatory filing. The company can appeal the inspector general’s audit directly to DeVos, but department officials say Eitel will have no role in the matter since he has recused himself from anything related to the company.
Bridgepoint spokeswoman Marianne Perez said Eitel has no input on company business and no work-related communications with employees while he is on leave.
Publicly traded for-profit colleges have butted heads with state and federal regulators over allegations of steering students into high-cost loans, misleading consumers about their programs and aggressive marketing tactics. The scrutiny, coupled with government lawsuits and depressed student enrollment, has placed tremendous pressure on the sector. But the election of Trump, who campaigned on reducing regulation across industries, has lifted shares of for-profit colleges as Wall Street anticipates the weakening of federal rules and oversight of the industry.
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