Public Testimony: Alexis Goldstein calls on ED Department to uphold Borrower Defense and Gainful Employment

Today at a public hearing at the Department of Education, AFR’s senior policy analyst gave testimony about the need to enforce the Borrower Defense and Gainful Employment regulations, not to reopen or dismantle them.

Here is her testimony, as prepared for delivery:

“I can’t believe we’re here again.

Just last year, the Department of Education went through the arduous process of negotatied rulemaking on borrower defense. And yet here we are, wasting time and taxpayer resources when the department has heard from all constituencies already; the Gainful Employment and Borrower Defense rules should be enforced, not reopened to be dismantled.

In the meantime, this administration has turned their backs on the students scammed by the very schools these rules are aimed at holding accountable. Not only do the students still wait, their lives on hold, their taxes offset, their wages garnished, but the Department is even stonewalling members of the Senate, failing to respond to a bipartisan request for basic information on the number of borrower defense applications received so far this year.

While students wait and wait and wait for the debt cancellation they’re owed by law, this administration has hired Robert Eitel. Robet Eitel took a leave of absence from being the vice president for regulatory legal services for the for-profit chain Bridgepoint, a chain that would benefit not only from the illegal delay of BD this administration has advanced, but benefit again from any dismantling of this decades old rule.

The illegal delay of the Borrower Defense rule update will benefit the kinds of schools that have collapsed in recent years under the weight of their fraud. Schools like Corinthian which, before it went bankrupt, faced charges of false job placement statistics, predatory lending, securities fraud, and the unlawful use of military seals in advertisements; all using billions in taxpayer-backed loans to make its executives into millionaies. And schools like ITT Tech long abused not only its students but also taxpayers through its misconduct, facing numerous lawsuits and investigations, including a lawsuit by the Consumer Financial Protection Bureau for predatory lending, and an investigation by 13 state attorneys general for lying to students.

Many students conned by these and other institutions wanted to be here today but couldn’t take a day off work, or couldn’t afford to travel to DC. I want to bring some their words to you today.

Jessica King attended Everest in Newport News Virginia, and found out through her own research that the Everest campus she attended would have failed the Gainful Employment standard had it been in place when she was enrolled. She was told by an employer that she should remove her time at Everest from her resume, because it was hurting her due to the school’s atrocious reputation. As it stands, she remains buried in debt despite the fact that the school took out loans for her without her consent.

Alicia Stevens writes: “I graduated with an AS in accounting from Florida Metropolitan University. In July of 2007 right after graduation I was diagnosed with breast cancer. After surgery I began looking for work. I didn’t have much luck. Once I finally got an interview I was informed by the HR person my degree was worthless…I live in county housing and have had to go on Section 8 in order to afford to even live here. At the age of 71 this loan will get forgiven when I die.”

Brian Pearl, writes: “I cannot even get any kind of licensure in the state I am currently living in (NJ) because the state only recognizes degrees from regionally accredited institutions. The admissions people (salespeople) told us that national accreditation is better.”

Americans for Financial Reform was formed in the wake of the 2008 financial crisis, where bad actors packaged and securitized the American dream, and then specifically targeted low income and minority communities. Many of these same communities targeted in the subprime crisis, were targeted once again by for-profit schools.

In internal documents obtained by the Department of Justice, Corinthian described its target demographic as people who were “isolated” and “stuck.” The targeting worked. The biggest increase in enrollment in for-profit schools came in the immediate wake of the crisis, from 2008-2009 when many Americans were feeling stuck.

Dismantling the gainful employment and borrower defense rules will do nothing more than unleash a new wave of waste, fraud and abuse. This country teaches its citizens that Education is a path to a better life. For far too many years, allowing title IV funds to flow to institutions engaging in fraud have turned this dream into a nightmare. The Department has a choice of where it goes next. If it continues down this path of re-opening gainful employment and borrower defense its legacy will be damning students to lives full of poverty, while making executives of proprietary institutions into millionaires. I sincerely hope this Department chooses a different path. Thank you.”