This is a special post from Jane Farley, you can see her byline at the end of this article.
Anyone following the news remembers that there has been a lot of controversy around the nomination and appointment of Betsy DeVos as Secretary of Education. In fact, it wouldn’t be a stretch to suggest that DeVos is among the most controversial of Trump’s appointees – especially after her confirmation resulted in a tie that had to be broken by Vice-President Mike Pence.
DeVos is married to Dick DeVos, who is part of the family that started Amway and is estimated to be worth more than $5 billion. As a couple, they have been frequent political contributors to Republican candidates and causes. This has led many to make accusations that she would never have been recommended had it not been for her position as an important Republican party donor who is estimated to have made over $200 million in political contributions over the years.
During her confirmation hearing, many Senators grilled DeVos about her experience managing large budgets and programs and she could not come up with instances where she had developed any experience similar to what she would need as a Secretary of Education. She also has no experience in educational leadership or as an educator. In fact, her primary educational experience seems to be her lobbying on behalf of charter schools in Michigan. Many advocates for public education complain, however, that she privileged charter schools over traditional public schools.
But DeVos has also courted controversy for her investments in student loan companies which have some accusing her of profiting off the student loan crisis.
DeVos and her husband have invested or indirectly invested in a number of student loan or education related companies. One of these companies is the lending startup SoFi, which started by refinancing student debt, but is now branching out to offering mortgages and other personal loans as well. SoFi is one of a handful of new online student loan refinance companies that have helped transform the student loan refinance industry.
But while SoFi offers competitive loans which can actually help student loan borrowers repay their student debt, another one of DeVos’ involvements in student loans is more controversial.
She and her husband involvement in a student debt collection firm called Performant Financial. Among a number of things that the company does, collecting on federal student loans is one of them although they recently lost out on a contract with the Department of Education. There were also numerous complaints against the company by borrowers.
DeVos has pledged to resolve any conflicts of interests that she might have based on her investments and her current position. But some are worried that she plans to potentially use a family trust to mitigate conflicts and that her connections to these companies will shape the way that she sees the student loan crisis and educational policy in the United States.
For her, education has been a way to make money rather than a public good and there is some fear that programs could be at risk students under her administration or that they could become focussed less on helping students and more on finding market based solutions that could save the Department of Education money, but could cost students more.
Despite the fact that so many campaigned against her appointment, ultimately Devos was sworn in as Secretary of Education. It is still not clear how she intends to treat student loans or whether some programs might be in danger under her leadership. While the fact that she profited from a student loan debt collections company like Performant might make some people cautious, all that anyone can do is wait and see how she leads the Department of Education.
The $1.4 trillion total in student loan debt has grown consistently over the last decade, pushing 44 million Americans to find a balance between paying off accumulated school debt (and interest) and other financial obligations each month.
In 2016, the average graduate from a four-year university or college had a burden of $28,000 in loans to repay. The default rate is pushing 12 percent which would bring the total number of defaulted borrowers to over 4.4 million.
Now, more than ever, college students are facing an uphill battle when it comes to affording the cost of earning a degree. The federal government has taken steps to make student loan repayment more affordable and accessible for millions of borrowers, implementing plans that include income-driven options. However, little has been done to put the proverbial lid on rising tuition costs – the root of the problem that forces students to borrow to meet their education goals.
This leads back to some of the original issues with DeVos in addition to the fears of a reduction in the number of federal options for student loans. Will the new leadership provide an environment for college tuition to rise even further? Those who stress DeVos’ ties to the for-profit industry would most likely support the likelihood of this scenario.
Many states started to scale back their support for higher education decades ago; some isolated trends are fairly representative of the national issue. Take Montana for one example. Data from the Office of the Commissioner of Higher Education show that the state appropriated $120 million to education, with the intent of keeping the rise of tuition throughout universities and colleges in Montana from experiencing a steep hike. Despite this, data from 2005 showed that the appropriated amount for education was $7 million less than the allotted amount in 1992. Throughout those years, the Board of Regents utilized their power to raise tuition, directly impacting students and their ability to attend and pay for school.
Students considering or currently in a degree program at an institution of higher education face difficult choices as it relates to footing the bill. Some may make the choice to work a part-time job (or two) in an effort to avoid taking on student loans to cover the cost; others may borrow through public and private student loan providers to pay the bill. In some cases, students may opt to forego college altogether because the cost of attending is simply too steep.
Jane Farley is a freelance writer who just recently graduated from college with a hefty amount of student debt. After embroiling herself in politics while studying political science throughout college, she takes a special interest in writing about the political environment that is so prevalent today. Given her own student loan situation, she likes to scrutinize politics within the student loan industry which is somewhat her speciality.