Arne Duncan Resigns Amid Legacy-Threatening Student Debt Crisis

The education secretary leaves behind 1 in 4 borrowers in distress.
Arne Duncan is one of President Obama's longest-serving Cabinet members.
Arne Duncan is one of President Obama's longest-serving Cabinet members.

U.S. Education Secretary Arne Duncan came to Washington to reform K-12 schooling. But as he announced Friday that he plans to leave office in December, it appeared more likely that his legacy would be defined by the unprecedented distress among millions of Americans struggling to pay back student loans.

The Debt Collective, a pro-borrower group, said it hoped that the next secretary "has the wherewithal to clean up the department's mess and do what's right."

Duncan will be replaced by John B. King Jr., a senior adviser who has been doing the job of deputy secretary since January even as President Barack Obama has declined to nominate him for the post. Multiple news outlets reported Friday that Obama would not formally nominate King to be secretary either, avoiding a Senate battle. Like Duncan, King has spent most of his career so far focused on K-12 issues.

Duncan said in a note to his staff that he was leaving to spend more time with his family, who had recently moved back to Chicago. He had previously said he planned to stay at the Education Department until the end of Obama's second term.

"Serving the president in the work of expanding opportunity for students throughout this country has been the greatest honor of my life," Duncan said in the note. "I imagine my next steps will continue to involve the work of expanding opportunity for children, but I have no idea what that will look like yet."

A member of Obama's Cabinet since January 2009, Duncan sought to promote national standards on K-12 education and greater use of standardized tests to gauge student learning and teacher effectiveness. He enthusiastically supported charter schools, a sector that produced many of his top aides, including King. But the problem of college student loans grew dramatically, demanding more attention and leading to repeated missteps and ignored opportunities.

Duncan's first two years on the job saw some victories. The Obama administration expanded Pell Grants, which are aimed at college students from low- and moderate-income households, and killed a bank-based federal student loan program that enabled lenders to book handsome profits without suffering the losses associated with loan defaults. The latter was a goal long sought by many Democrats.

But total student debt has roughly doubled during Duncan's tenure, from $666 billion to nearly $1.3 trillion, according to the Federal Reserve. Policymakers fear that rising indebtedness threatens future economic growth, especially since so many young Americans toiled for credentials that aren't valued by employers.

Among the more than 40 million Americans with student loans, 1 in 4 are either in default or struggling to stay current, according to the Consumer Financial Protection Bureau. While the lackluster economic recovery plays a role, the situation has been exacerbated by the poor practices of the Education Department's loan contractors. The department told the White House in a Thursday report that empowering those loan contractors and reducing their workload were keys to reducing borrower distress.

Yet in May, the Education Department had cleared Navient Corp., the student loan giant formerly known as Sallie Mae, of wrongdoing despite Justice Department allegations that the company intentionally cheated thousands of active-duty service members on their student loans.

Thousands of Americans who took out loans from Duncan's department to attend unscrupulous for-profit colleges are now fighting to force him to cancel their debts on the grounds that they were defrauded on the Education Department's watch.

Aggrieved debtors who attended for-profit schools owned by Corinthian Colleges Inc. declared a "debt strike" earlier this year following Duncan's attempts to bail out the chain before it collapsed and declared bankruptcy. Several state attorneys general, along with the Consumer Financial Protection Bureau, have sued Corinthian, alleging that it duped prospective students with false job placement and graduation rates. Corinthian has denied wrongdoing.

On April 28, 2015, students wait outside the Corinthian-owned Everest College, which was being shut down, as they hope to obtain information on loan forgiveness and transferring credits to other schools.
On April 28, 2015, students wait outside the Corinthian-owned Everest College, which was being shut down, as they hope to obtain information on loan forgiveness and transferring credits to other schools.
Christine Armario/ASSOCIATED PRESS

"A new face in the Obama administration's Education Department won't take back Arne Duncan's failures, but could create a new opportunity to better address the problems facing millions of American families with student debt," said Chris Hicks, who leads the Debt-Free Future campaign at the advocacy group Jobs With Justice.

The Debt Collective accused Duncan of presiding over "one of the worst scandals in the history of American higher education."

Barmak Nassirian, director of federal relations and policy analysis at the American Association of State Colleges and Universities, said that Duncan's tenure, aside from the first year, stands out for its "missed opportunities in higher ed."

Last year, for example, the administration pushed through a new rule to limit federal student aid going to career programs that saddle graduates with enormous debts relative to their eventual earnings. The changes do little to help those students who drop out of for-profit schools before graduation.

In 2010, the Education Department adopted new rules overturning George W. Bush-era guidelines that effectively enabled for-profit colleges to pay their employees bonuses for enrolling students who subsequently received federal student aid. But Duncan's department has done little to enforce the ban, according to its inspector general.

"With regard to gatekeeping practices and oversight of federal aid programs, many of us hoped for a marked change in the department's historical behavior under this administration," Nassirian said. "They have talked a tough game (and I concede that that is worth something), but the talk has not been followed by the kind of decisive action one would expect."

Much of that inaction involves the department's lackluster efforts in policing its loan contractors. Lauren Asher, president of the Institute for College Access & Success, and Karen Gross, a former Education Department adviser and the president of Southern Vermont College, both faulted Duncan for inaction in this area.

Gross said the Obama administration should end the Education Department's reliance on outside contractors to collect borrowers' monthly payments. "The government is actually very adept at collecting. The IRS does it all the time," she said.

Duncan has had more success in other areas of higher education, such as combating sexual assault on campus. During his tenure, the Education Department has aggressively cracked down on colleges' inadequate response to sexual violence, often drawing pushback from university administrators and their lobbyists.

The department has publicized which schools are under investigation for flouting federal guidelines in this area and has launched probes of more than 140 different colleges. The moves came after the White House set up a task force on campus rape, and after student activists protested and called for greater transparency.

Also under Duncan, the department for the first time publicly released data showing how students from many colleges have fared after graduation, such as what their annual earnings were and whether they've repaid their student loans. Much of the higher education lobby had resisted that effort, which was seen as a White House goal.

Officials in Washington have largely praised Duncan for his work on K-12 issues. Sen. Lamar Alexander (R-Tenn.), chairman of the Senate education committee, described Duncan on Friday as "one of the president's best appointments."

"When we disagree, it is usually because he believes the path to effective teaching, higher standards, and real accountability is through Washington, D.C., and I believe it should be in the hands of states, communities, parents and classroom teachers," Alexander said.

Sen. Patty Murray (Wash.), the top Democrat on Alexander's committee, described the departing Duncan as someone who is "passionate about giving every student in America the chance to excel in the classroom, build their skills, and set out on a path toward the American Dream."

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