1. Biden is Going Big on Cordray’s Attacks

President Biden is putting massive new spending next to curtailing access to career colleges. His 2024 budget request for the Student Financial Aid Office of Enforcement released in March is dramatically increasing the enforcement budget. At $26.5 million, the new 2024 budget request represents a 600 percent increase in taxpayer funds to the office.

History of the Office of Enforcement

In 1933, Will Sutton, the noted bank robber and FBI irritant, gave the classic American quote when he was asked why he robs banks. His blunt response, “because that’s where the money is.”

Unfortunately, the Department of Education, isn’t focusing this type of common-sense approach to regulating higher education institutions. They’re looking to the left’s more recent boogey-man – career colleges – instead of focusing on the serious problems at traditional private and government run colleges and universities.

It’s not a secret that the Student Federal Aid Office of Enforcement was brought back by the Biden administration to target proprietary schools. At every level of the Department of Education structure, anti-for-profit school activists have been hired by the Department of Education to run roughshod over this crucial industry.

By targeting a small sector of schools that enrolls about 5%, which is around 1 million enrolled students, the Federal Student Aid is providing virtually no oversight or investigative authority over the schools, of which 95% of students attend. The unfortunate reality is that the department is harming students by ignoring complaints and problems at a majority of the nation’s schools.

Experts have said that the FSA Office of Enforcement should broaden the number and type of schools they are targeting. Referring to the head of Student Federal Aid, Trace Urdan, managing director at Tyton Partners, an investment firm stated: “It would go a long way toward Richard Cordray’s credit if he were to actually use this same initiative to hold some nonprofit schools accountable by similar standards.”

“But I’m not holding my breath,” concluded Urdan.

Harkin Report

Senator Tom Harkin (D-Iowa) has played a key role in catalyzing the criticism of career colleges. His 2012 report “For Profit Higher Education: The Failure to Safeguard the Federal Investment and Ensure Student Success” became a key resource for activists trying to stop career colleges. It created a road map for activist groups on which for-profit schools to target. Numerous staffers went to work for activist organizations that target these schools. One notable example is Veterans Education Success Executive Director Carrie Wofford and Board Member Bethany Little both worked for Senator Harkin.

Legislative History of the Office of Enforcement

The Federal Student Aid Enforcement Unit was initially started in February 2016 by the Obama Administration to investigate and bring actions against for-profit schools. Supporters of the Enforcement unit claim that the office was set up to conduct oversight on all federal education funds, but the reality is, supporters in Congress have used the Unit almost entirely as a mechanism for targeting for-profit schools.

The Department of Education has said the Unit’s official purpose is to respond quicker to “allegations of illegal actions by higher education institutions — a move that comes as a deluge of complaints about for-profit colleges have poured into the department.”

To bolster the effort, President Obama included a healthy Appropriations request in his fiscal 2017 budget for the student financial aid office. While the enforcement office falls under the enforcement and oversight budgets, the 2017 budget was for 84 full-time employees with a budget increase of $11.7 million, a 25% increase over FY2016.

The 2017 budget bolstered Federal Student Aid Office’s (FSA) capacity to conduct enhanced enforcement by adding resources to the new Enforcement Office. Created in early 2016, “the goal of this new office is to take enhanced enforcement action against for-profit school getting federal education funds. The office will work with multiple Federal and State agencies to identify potential misconduct or high-risk conduct of institutions, proactively use enforcement tools to gather information, and fully use available actions to seek remedies.” The enforcement unit expanded to 12 attorneys and investigator and were focused solely on investigating DeVry university, a for-profit school, and ignoring bad deeds at traditional schools.

The Trump administration took a different tack with the office by basically cancelling the funds and repurposing key staff to higher priority efforts. Led by Sens. Sherrod Brown (D-OH), Elizabeth Warren (D-MA), Richard Durbin (D-IL), Patty Murray (D-WA) and Richard Blumenthal (D-CT), several dozen Senate Democrats criticized the Trump administration on the closing of the Student Financial Aid enforcement office.

Soon after the Biden relaunch of the enforcement office was announced, the Senate Appropriations Committee let the Biden administration know that they were “concerned about the low level of staffing in, and the utilization of, the Student Aid Enforcement Unit, which is critical to fighting fraud and abuse. Accordingly, the Committee strongly supports the Department’s recent announcement to establish an Office of Enforcement within FSA to identify and address major problems across institutions of higher education that pose widespread risks to students and taxpayers.” Both Senators Durbin and Murray sit on the appropriations subcommittee that funds the Department of Education.

The 2023 Administration’s budget increased the Office of Enforcement budget to $4.4 million. This includes $400,000 for the “access and continual operations and maintenance of the Department of Justice’s e-Discovery system. e-Discovery provides litigation support services and electronic file processing for ongoing litigation.” Essentially a significant increase in the tools necessary to sue career colleges. As the report details later, the office also increased the staff dedicated to targeting career colleges.

The 2024 budget request for the Student Financial Aid Office of Enforcement released in March is dramatically increased from the previous year. At $26.5 million, the new 2024 budget request represents a 600 percent increase in taxpayer funds to the office. Despite the dramatic budget increase, a large portion of the four-page budget description is word for word the same as the 2023 budget request. The 2024 request also includes activities that they mentioned to Congress actions the office would complete in 2023.

It appears they didn’t get everything done that they hoped last year.

During fiscal year 2023, the enforcement office “will develop and administer a risk model aimed at identifying schools and service providers potentially engaged in misrepresentations that could impose significant cost on students and taxpayers.”

In the 2024 budget justification, they report “that they are in the process of developing a risk model aimed at identifying schools and service providers potentially engaged in misconduct that could impose significant costs on students and taxpayers.”

The cost of the office is in fact much larger than the $26.5 million. Most of the Office of Enforcement salaries are allocated through FSA’s overall personnel budget request.

Through reviewing the annual appropriations hearing, it is clear that the Department of Education and the Democratic senators on the appropriations committee clearly work together as one team. It is clear from the questions for the record at the annual FY2022 Department of Education appropriations hearing that the senators are pushing the anti-for-profit schools’ policies very aggressively. An example of a question from Senator Richard Durbin to Education Secretary Miquel Cardona shows the coordination:

Question from Senator Durbin. You recently announced an ambitious higher education regulatory agenda which will include topics like gainful employment, for-profit conversions, borrower defense, financial responsibility, administrative capability. While I’m pleased the Department is undertaking this process, it is lengthy and the Department’s rules subject to litigation. As it goes through the negotiated rulemaking process, how will the Department—under your leadership—use its extensive existing authorities to engage in aggressive oversight and enforcement activities related to predatory for-profit colleges?

Answer from Secretary Cardona. The Department of Education is working to ensure stronger oversight of predatory institutions through multiple venues. I expect that the rulemaking process will help the Department to design far stronger protections against predatory practices by institutions. Additionally, the Office of Federal Student Aid is working to ensure careful oversight of institutions, investigating reports of problematic practices and increasing monitoring of institutions that receive Federal aid under Title IV of the Higher Education Act.

The new Chief Operating Officer of FSA, Richard Cordray, is committed to ensuring consumer protection is embedded in how FSA serves students and borrowers.

The dozen or so questions by Senator Durbin at this June 16, 2021, hearing focused entirely on positioning the Department’s oversight and enforcement bullseye squarely onto career colleges. Coincidentally, 10 months later, Brad Middleton, Senator Durbin’s Education staffer who likely wrote these questions, joined the Department of Education as a senior advisor to the Student Financial Aid Enforcement Office. When he left Durbin’s office, the Senator had described Middleton, as his “invaluable right hand in efforts to hold predatory for-profit colleges accountable,” in a lengthy tribute published in the Congressional Record.

Oversight of the Department of Education Student Financial Aid Enforcement Office

Between 2016-2021, staffed by burrowed Obama staffers during the Trump Administration, the Department of Education offices have made referrals to impose penalties on 13 colleges at least partly for substantial according to an analysis by the Government Accountability Office (GAO) of Department of Education data. Ten of the 13 colleges were for-profit institutions, two were private nonprofit, and one was public, according to the data. The most common penalty imposed was ending a college’s participation in federal student aid programs, an action the Department of Education took in eight of the 13 cases, according to the analysis. Seven of the schools targeted by the Department ended up shuttered. This data demonstrates clear a targeting of career colleges.

After restarting the enforcement office in October 2021, public statements by supporters indicated that the unit would target for-profit schools. Since October 2021, the Enforcement unit has opened six new investigations that appear to all be against for-profit schools. All investigations are officially opened with a signed memo from the Chief Enforcement Officer. Once the Chief Enforcement Officer signs this memo, the investigators notify the college of the investigation.

A January 2023 GAO report was critical of the enforcement office for not having “completed work vital to improving oversight of colleges.” The enforcement office “has not completed and updated procedures for selecting colleges for investigations, conducting investigations, and imposing penalties on colleges that are found to be engaging in substantial misrepresentation. Education has lacked these complete and updated procedures for at least 6 years.”

Combined with the fact that the Enforcement office hired anti-career college activists and that they have ignored internal efforts and procedures to justify the investigations they pick, it appears that the fix has been in for some time.

Pages 9-13.

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