6 Things Betsy DeVos Has Done on Higher Ed

Education Secretary’s Higher Education Report Card at the 2017 Midpoint

Education Secretary Betsy DeVos listens as President Donald Trump speaks during a roundtable discussion in Orlando, Florida, on March 3, 2017.

July 1 marks the beginning of a new year for federal financial aid for higher education, bringing changes that will affect the millions of Americans who use these programs. On the positive side, low-income students will be able to access additional Pell Grant aid thanks to Congress bringing back year-round Pell, a program that provides additional funds for students who attempt more coursework—often during a summer session. In less fortunate news, the annual reset of student loan interest rates resulted in a 69-basis point increase to 4.45 percent for undergraduates.

Though neither the funding for year-round Pell Grants nor the increased interest rate were the direct result of actions by the U.S. Department of Education, Education Secretary Betsy DeVos and her team have not been sitting on their hands. In just under five months on the job, DeVos and the Trump administration have initiated several actions that could have significant effects on higher education and student debt over the long run.

The list of higher education actions under the new secretary is not pretty. If the work done by DeVos and company in the first 144 days of her service all comes to fruition, then millions of borrowers will get worse customer service on loan servicing; loans will become less generous and grants will shrink; students will not be protected from low-value programs; and defrauded borrowers will not get relief.

Here are six things DeVos and the Trump administration have done thus far on higher education, including the number of individuals and dollars affected.

1. Encouraged ‘too big to fail’ in student loan servicing

Number potentially affected: 32 million borrowers owing $963.5 billion

On April 12, the Trump administration withdrew Obama-era policy guidance that incorporated borrower-focused protections and customer service guarantees into a competition to select new companies that will service all federally held student loans. The revised competition announced in mid-May included some particularly troubling changes. First, the department announced that it would select just one company to serve as the primary servicer for all 32 million borrowers who have a student loan held by the federal government. Second, the department eliminated requirements for the servicer to provide more proactive assistance—such as more calls and greater outreach—to borrowers with a high risk of default. Admittedly, the contract still includes some important features—particularly the use of a single, common platform for all borrowers that features Department of Education branding. But giving one company a $1 billion loan servicing monopoly creates a “too big to fail” situation, where oversight becomes difficult and poor student results become likely.

2. Proposed cutting $143 billion from federal student loans

Number potentially affected: At least 6 million borrowers a year and $143 billion in cuts over 10 years

The president’s budget request released in May had a clear message to student borrowers: Go kick rocks. Over 10 years, Trump’s budget proposes to cut a stunning $143 billion in various benefits to millions of student loan borrowers. This includes taking $39 billion from students by ending subsidized Stafford Loans for new borrowers. Every year, this program provides interest-free loans to 6 million borrowers with financial need while they are in school.

It also cuts another $76 billion by creating one plan for new borrowers to pay their loans based on their income. It would require borrowers to pay a larger share of their income each month than most plans available today. Although undergraduate borrowers get forgiveness on debt remaining after 15 years of payments—five years faster than current plans—graduate borrowers would have to wait 30 years—five or 10 years longer depending on the plan. Just under 6 million borrowers with a loan issued directly by the government are currently on one of those income-driven repayment plans.

Finally, the president’s budget proposes cutting another $27 billion by eliminating Public Service Loan Forgiveness, a benefit that erases a borrower’s outstanding debt after 10 years of public sector work. About a half-million borrowers have voluntarily expressed interest in the program, although the number affected is likely much higher.

To be fair, the proposed budget did include one positive change—saving $443 million by ending unnecessary subsidies to some remnants of the old bank-based student loan system. But these savings are nothing compared with the billions of dollars that students will now be on the hook for should these programs take effect.

3. Proposed raiding the Pell Grant surplus and reducing grant aid

Number potentially affected: At least 1.6 million students and $5 billion in one year

In addition to the student loan changes, the Trump budget request also suggests cutting billions from grant programs. The largest is a $3.9 billion hit to the rainy day fund for the Pell Grant program, which had been built up over time by earlier cuts to the student aid programs. Although this move does not immediately reduce the nation’s largest grant for college, it puts it on shakier ground for the long term. Beyond that, the budget also seeks to eliminate the Federal Supplemental Education Opportunity Grant, which annually provides $732 million in additional assistance to 1.5 million students with need. And it wants to halve money for subsidized employment through the federal work-study program, a $487 million cut affecting 300,000 recipients. Finally, the proposed budget includes a series of other cuts to college access programs—$193 million; some institutional support programs—$86 million; and funds for childcare on campus—$15 million. Click here to see the effects of subsidized loan cuts by congressional district.

4. Began dismantling 2 consumer protection regulations

Number potentially affected: At least 64,000 students and an estimated $2.5 billion in pending borrower defense claims plus 360,000 students and several billion dollars for gainful employment

On June 14, the Department of Education announced plans to pause and rewrite regulations around two major consumer protection regulations. The borrower defense rule provides a process for defrauded borrowers to get loan forgiveness; creates conditions for holding schools financially accountable when problems arise; bans the use of mandatory arbitration provisions that prevent students from taking their schools to court; and provides a longer time frame for students to get discharges when their school closes, among other things. The rule was supposed to take effect on July 1 but is now indefinitely paused.

The attempt to redo the borrower defense regulation comes amid stories that the department has approved no new requests for forgiveness through this provision since the Trump administration took office.

The gainful employment rule, meanwhile, holds career training programs accountable when their graduates who received federal aid have high levels of debt compared with their incomes. While the department is not pausing this rule, it plans to rewrite it. Undoing it could allow more than 2,000 programs that produced nearly 360,000 graduates to continue operating.

These regulations may just be the beginning. Last week, DeVos announced a call for comments on a regulatory reform task force. This could be a signal that DeVos is looking to further gut student protections in favor of predatory colleges.

5. Restored onerous collection fees

Number potentially affected: Some small subset of the 4.2 million borrowers in default on $65.6 billion in debt from the bank-based loan system

Restoring large collection costs on some defaulted borrowers was one of the first things DeVos did on higher education. This change applies to borrowers with certain types of older debt who immediately attempt to resolve a default. The Obama administration attempted to prevent the companies that were collecting on these loans to charge the borrowers a fee. However, DeVos reversed course, allowing collection agencies to charge borrowers an additional 16 percent of their loan balance. After undoing this change, many of the companies announced they would not charge this fee, but DeVos’ actions signal that she could be more of an advocate for lenders—not students.

6. Implemented year-round Pell Grants

Number potentially affected: 900,000 students and $1.5 billion

Despite the troubling actions cited above, Congress’ decision to restore funding for year-round Pell Grants is the most positive higher education development this year. The restoration of this funding allows low-income students to get additional grant aid if they attempt more coursework in a single year. Although it was Congress that restored the grants, the department quickly produced regulations in time for the extra money to become available on July 1.

Other troubling actions of note

Here are a few other actions taken by the Trump administration that could negatively affect higher education:

Conclusion: Things unlikely to improve

The Department of Education’s initial actions on higher education are unlikely to get better. The rule-making efforts are only just getting underway. But there is a host of other things to worry about that are not as high profile. This includes issues such as faithfully implementing regulations even as they are being rewritten, conducting robust reviews of accreditation agencies, and properly running the first round of public service loan forgiveness.

At some point, the department will also need to flip from reflexively trying to undo Obama-era actions to a proactive agenda. At her confirmation hearing, DeVos mentioned the need to find solutions around accountability, student debt, and a host of issues. Hitting the undo button repeatedly is only going to take her so far.

Ben Miller is the senior director for postsecondary education at the Center for American Progress.