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).