The Special Master Feels Your Pain: For-profit College Students Demand Debt Cancellation in D.C.


It is a rare occasion when policy elites sit across the table from those whose lives are affected by their decisions. Last week, I participated in just such an event when I accompanied a group of student debt strikers and defrauded former for-profit college students to a meeting in Washington D.C. with a man who has the power to cancel their loans and alleviate their suffering.

Joseph A. Smith is the “Borrower Defense Special Master” (yes, the acronym is BDSM) for the U.S. Department of Education. Formerly the federal monitor for the National Mortgage Settlement (a program that was criticized for severely limiting the number of homeowners who actually received promised relief), Smith was appointed BDSM in June after 200 hundred former for-profit students went on strike and thousands more disputed their loans through a little-known provision in the Higher Education Act called “Defense to Repayment.”

Most of the students had attended Corinthian, which enrolled hundreds of thousands of people over the years. It promised them high-paying jobs and brand-new lives and delivered little more than dashed dreams and a lifetime of unpayable debt. After raking in billions in taxpayer dollars and delivering windfall profits to wealthy investors for almost two decades, the company declared bankruptcy last year. Students, however, are stuck with their debt.

The meeting between defrauded borrowers and Smith was an unusual occasion inside the halls of power. The Department of Education is the federal agency that regulates colleges and universities. The Secretary is a cabinet-level appointee and, with 5,000 employees and a budget of around $70 billion, the Department is charged with ensuring that students receive an education worthy of the name. The agency’s dereliction of duty began years ago. During the same decade when President Bill Clinton was ramping up efforts to deregulate the financial industry as a whole, Congress authorized for-profit colleges to generate up to 90% of their revenue from federal student loans. For the last 25 years, the Department has funneled billions into hundreds of schools set up with the explicit goal of providing big profits to financial firms like Goldman Sachs (a former owner of for-profit operator, EDMC) and Wells Fargo (the largest investor in Corinthian).

Fast forward to the current century. After the financial crisis, the investor class got bailed out with trillions in public money and the austere years that followed proved to be a further boon to for-profit college officials and stockholders. After 2008, Americans enrolled in college in record numbers to prepare themselves for better-paying careers. What choice did they have? Profits rolled in to the well connected, including Sen. Diane Feinstein’s husband and former Corinthian investor, Richard Blum, former Obama C.I.A. Chief, Leon Panetta, who served on the board of Corinthian College, and the husband of Sen. Olympia Snowe, a former CEO of Educational Management Corporation (EDMC).

Once students left their schools and found their degrees worthless, grim reality set in. They owed tens of thousands (or more) for degrees from unaccredited schools, and they had studied in fields where jobs are in short supply or barely pay above the minimum wage. They could not afford to pay their debts. With the help of the Debt Collective, where I work as Co-director, students got organized and went on strike.

When faced with an organized bloc of students who were refusing to pay, the Department – which issues, guarantees, and collects on Federal student loans – engaged in a tactic reminiscent of the mob hiring a “cleaner” to bleach the scene of the crime.

As Special Master with authority over the Corinthian case, Smith’s job is ostensibly to review debt disputes submitted by thousands of people lured into scam colleges and decide whether they are worthy recipients of relief. In reality, his job is to continue deploying the Department’s chosen tactic of delaying debt cancellation before eventually denying it outright.

The hour-long meeting between strikers and the Special Master was an opportunity for former students to express their anger at the Department for its failures. Though Smith has been in office for 8 months, this was the first time he had met with any of the students affected by Corinthian’s illegal conduct and by the Department’s complicity in the fraud. Some had travelled from across the country to tell their stories of financial ruin and to ask why Smith has yet to provide relief to the vast majority of students who qualify for it.

Unsurprisingly, the meeting did not end with the Special Master promising to finally use his agency’s moral and legal authority to cancel loans. Instead, he asserted the necessity of reviewing individual claims one by one in a bizarre and opaque bureaucratic process that would require each borrower to re-prove injury, even though the school they attended has already been fined and sued into insolvency.

More than a refusal to see justice done in accordance with the law, Smith’s comments at the table exemplified a 21st century brand of upper-class obfuscation that I think should become part of the public record. In the words of the sociologist Shamus Khan, elites like Smith view “hierarchy as a structure that marks the world” but not one that makes it. Khan explains that today’s elites view inequality not as an outcome of the upward distribution of wealth and power but as a “result of the characteristics of individuals ­– their hard work, their choices, and even their luck.”

Mr. Smith exemplified this view when student strikers complained that someone with his class and educational background could not possibly relate to them and that, consequently, they did not trust him to do the right thing. Seeming offended, a man who is a securities lawyer and a former banking commissioner for North Carolina countered by insisting that his son had “refused to take money from his parents” and thus had to work his way through college. This experience of filial defiance, Smith asserted, meant that he could “somewhat” relate to the experience of low-income people and first-generation college students who had sought college credentials for a better life and ended up financially devastated. The Special Master feels your pain.

Student debt strikers, appalled by Smith’s claim, pressed him further. They reminded him that his social position insulated him from the outcomes that his policies would have on hundreds of thousands of others. But Mr. Smith would not be moved by these appeals. He became even more insistent that he was not all that different from those low-wage workers, retirees on a fixed income, and mothers terrified for their children’s future who sat across the table from him. “I’m fortunate,” he admitted, “but my parents and grandparents worked for their advantages.” A chill descended over the room as it became clear that defrauded borrowers had traveled to Washington to hear a rich white man in a suit tell them that hard work and merit explained the vast gulf between them

Mr. Smith’s unwillingness to acknowledge the hierarchy that structures his relation to the people whose future he largely controls is indifference to human suffering. Khan argues that such indifference – a kind of cultivated ease – is an essential tactic of elite identity and dominance. Upper-class achievements, Khan explains, “seem to almost passively ‘happen.'” The frame of ‘hard work = success’ that fuels meritocratic discourse and that Smith repeated is a mantra that elites “mobilize to code their advancement within hierarchies.” In other words, hard work explains Smith’s position but students, who also worked incredibly hard to go to college, are left out of that equation.

During the meeting itself, Mr. Smith came off as supremely petty, as more interested in defending himself, his family, and his precious honor than in granting the slightest concession to his audience of desperate supplicants. In the days since the meeting, though, I’ve come to recognize his patronizing assertion of understanding and sympathy as more than one upper-class toad’s particular affectation. Instead, it was a strategy grounded deep in his identity as a member of an elite class and in a corresponding rationality that makes others’ suffering not only logical but an inevitable outcome of the choices they make. The Special Master represents a political class whose authority we now know must be revoked. Smith’s depraved indifference to human suffering – suffering that he might end with the stroke of his pen but will not – demonstrates that the road to justice is long but at least we can see it from here.




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