Inside Higher Ed reports today that USA Funds, a corporation engaged in collecting federal student loan debts from borrowers, has sued the U.S. Department of Education over a policy statement the Department released last week barring companies from charging loan collection fees to students who default but promptly make arrangements to resume payments.
USA Funds's complaint says the Department letter is "an obvious response" to a legal brief that USA Funds filed in a separate lawsuit. In that case, a Kansas woman, Bryana Bible, sued USA Funds for assessing more than $4500 in extra collection fees against her to remove her loan from default status. Bible had acted to resume her payments within 18 days of receiving notice of default. USA Funds doesn't care -- it wants its extra $4500 from Bible, and presumably similar fees against a whole bunch more folks -- and it is claiming that the Department's position is wrong and also unfairly retroactive.
That collection agencies want more money and will sue to get it isn't really surprising. But what's notable is the identity of USA Funds's CEO. He's William D. "Bill" Hansen, who took the job in April 2013. You might remember him from his tenure as Deputy Secretary of Education under George W. Bush, where he helped lay the groundwork for well-documented recruiting abuses by for-profit colleges, many of which receive 85-90 percent of their revenue from taxpayer dollars. Under Hansen, the Bush Education Department, ignoring the advice of university leaders and student advocates, made it easier for for-profit schools to pay recruiters based on the number of students they signed up, despite the fact that such practices were illegal. In 2002, Hansen sent a memo declaring that the Administration would go easy on violators of the incentive compensation ban, fining offenders rather than ending their eligibility for federal aid. Coercive and deceptive recruiting has helped fuel revenues in the for-profit education industry, but has left many students deep in debt and without useful training or degrees.
Although the Obama Administration took a much more sensible approach to for-profit colleges, namely that they shouldn't be engaging in predatory practices, apparently, as the Department's inspector general found in March 2015, some Department bureaucrats didn't get the message, and essentially continued to operate as if the Hansen memo still ruled. Which, technically, and astonishingly, it still did, until Under Secretary Ted Mitchell formally rescinded it last month.
So Mr. Hansen's legacy has colored some 13 years of abusive recruiting practices by this industry. And now, as CEO of USA Funds, Mr. Hansen is fighting to see that some of the same students enrolled on the basis of such abuses can be socked with enormous collection fees that will go in his company's coffers.
Of course, Hansen isn't coming up with all his ideas himself. Mark Pelesh, a lawyer, is USA Funds's executive vice president for corporate and business development. The August 2013 USA Funds press release announcing Pelesh's hiring accurately noted Pelesh's last job; he had "previously served for nearly 10 years as executive vice president for legislative and regulatory affairs for Corinthian Colleges Inc." That most recent decade of work experience has vanished from Pelesh's USA Funds website bio. Perhaps that's because Corinthian lost its eligibility for federal loans and grants, and now has shut its doors and declared bankruptcy, under the weight of numerous federal and state law enforcement investigations regarding misrepresentations and potential systematic fraud, based largely on conduct that occurred while Pelesh was a top executive with the company.
You can write the concluding sentence yourself this time, folks. This stuff never stops appalling me, but then I still believe in a land of justice and opportunity. Have a great weekend. (h/t you know who you are.)
This article also appears on Republic Report.