In this Real News Network interview, white-collar criminologist and associate professor of economics and law at the University of Missouri, Kansas City, Bill Black discusses Education Secretary Betsy DeVos’s decision to stop investigating for-profit colleges and educational institutions for fraudulent practices.
GREGORY WILPERT: It’s The Real News Network. I’m Greg Wilpert, coming to you from Quito, Ecuador. The U.S. Department of Education, under the leadership of Education Secretary Betsy DeVos, is halting investigations into fraudulent practices of for-profit colleges, according to a report that the New York Times released last Sunday. The Obama administration’s Education Department had placed a special team in charge of investigating false advertising, deceptive recruitment practices, and false job placement claims at for-profit colleges. One of the most prominent investigations was the DeVry Education Group, recently renamed Adtalem Global Education, which is one of the largest for-profit educational companies in the world, with nearly two billion dollars in annual revenues.
Joining me to analyze the consequences of abandoning these investigations into for-profit colleges is Bill Black. Bill is a white-collar criminologist, former financial regulator, and associate professor of economics and law at the University of Missouri, Kansas City. He’s also the author of the book, The Best Way to Rob a Bank Is to Own One. Thanks for joining us again, Bill.
BILL BLACK: Thank you.
GREGORY WILPERT: So, one interesting aspect of the story is that Education Secretary, Betsy DeVos, hired several people from for-profit education institutions to work in the Department of Education. These include Robert Eitel, her senior counselor, Diane Auer Jones, a senior advisor on post-secondary education, and Carlos Muñiz, as the department’s general counsel. What’s going on here? Shouldn’t these appointments be considered conflict of interest and ring all kinds of ethics bills?
BILL BLACK: So first, ten seconds of personal privilege to welcome into the world, three hours ago, Heidi Weaver, our new granddaughter. Second, I made the easiest prediction of my life, after Trump was elected, that Warren Harding and Ulysses Grant could rest easy in the history books because there would no longer be a debate about the most corrupt administration in U.S. history. It would clearly be the Trump administration. There’s been a lot of focus on Scott Pruitt over at the EPA, in terms of corruption. But Betsy DeVos is giving him a consistent run for the money, just more under the radar.
So, here’s the background. First, out of the great financial crisis of 2008, one of the extraordinary things was that the most devastated people, in terms of loss of wealth, were not folks without college degrees, but actually folks with college degrees, who were either Latinx or Black. If you were Latinx, your average loss of wealth during the financial crisis, if you had a college degree, was nearly eighty percent. And it was roughly sixty percent if you were Black. That reversed the pattern for whites, where if you had a college degree, your percentage loss of wealth was lower than whites who had no college degree.
Now, part of that, of course, is the mortgage markets- being put into predatory mortgages at the worst possible time, at the peak of the bubble. But another thing, major thing, in terms of Blacks and Latinos, is that they are- disproportionately, they go to for-profit universities. And for-profit universities, characteristically- and this isn’t just recently, this goes back to World War II era, just after World War II when for-profit colleges first became a substantial deal.
And here’s the triple-whammy you get. One, they are much more expensive than regular universities. Two, you get a- statistically, a much, much worse education. That means your prospects in terms of jobs are far worse. And third, you’re left in massive debt because of the combination of the first two things. So that, instead of being the route to success, it is, as those overall statistics I cited, been an enormously good way of losing extraordinary amount of wealth between the mortgage markets and these for-profit universities.
So, long before the Obama administration came in, people have been writing about the really high incidents of fraud in these for-profit universities. The GAO actually sent undercover investigators that pretended to be people applying for college, which is, of course, really easy to send in testers of that kind. In every single case- so, I think they send them into the eight largest. In every single case, the supposed student was induced to do something that would be a false representation, which is to say, a crime.
In three of the eight cases, at least, the college counselor for the for-profit university consciously, expressly told them to lie and how to lie. Subsequent investigations under the Obama administration have documented the widespread layers of fraud, and for-profit universities have finally begun to experience what they should, which is that it’s very difficult- it’s more difficult to con people, and the government was finally cracking down. And that was- the problem was finally being reduced, and indeed there was some remedy at the federal level.
Because, after all, these are students had been induced by fraud to get into situations where they were literally driven bankrupt by the combination of expenses, debts, and limited increased employment prospects. And as viewers will, I hope, remember, the Republicans changed the bankruptcy laws so that student debt is not dischargeable in bankruptcy. So this, you know, is a cloud that stays over your entire life if it forces you into bankruptcy, from which you make never economically recover.
So, finally there was some recognition at the federal level that it was completely inappropriate to allow these entities to drive you bankrupt through what had been fraudulent misrepresentations to the students. And all for-profit universities live- I mean, and I mean almost totally live on federal grants to the students for education. Without those federal grants, no major chain of for-profit universities could exist. So, we’re really subsidizing all of these fraudulent entities through federal grants. And you would think an administration that A, promised to drain the swamp, and B, to stop these kind of rip-offs of the public sector, would crack down. But of course, none of us is surprised at this point to learn that it’s exactly the opposite.
The metaphor usually used is that DeVos has put the fox in charge of the chicken coop. But it’s really more- the way these for-profit universities operate, it’s more like you would put the vampires in charge of the blood bank, because they are basically sopping up the lifeblood of middle and working-class, and even poor people, through this device of the for-profit fraudulent rip-offs. And Betsy DeVos is now ensuring that the vampires can do this with absolute impunity from the laws.
GREGORY WILPERT: Now, Bill. The New Jersey attorney general complained on Thursday that the Department of Education is halting these investigations into for-profit educational institutions and is not even sharing information with states. So, I’m just wondering- maybe we could into a little bit of detail as to what kinds of shady practices these for-profit colleges are known for. And why is it so important to have the U.S. Department of Education investigate these practices, instead of having individual states in which they operate do these investigations and prosecutions?
BILL BLACK: So, I’ll take the last question first, because it’s the easiest. Only at the federal level can you shut down these fraudulent operations through a single action where they operate, which is typical, these chains of for-profit schools often operate in many states, sometimes all fifty states. Education also has, the Department of Education, all of the key data, because they go at the federal level, and they can and should share that with federal- sorry, state regulators and prosecutors.
And what we’re seeing is, again, akin to the 2008 financial crisis, where the Office of the Comptroller of the Currency and the Office of Thrift Supervision deliberately, and I mean that absolutely, deliberately- there’s no if ands or buts, sought to prevent effective regulation and enforcement, and even prosecutions, by state authorities. And we all know how disastrously that ended up.
As to the kinds of frauds, they are myriad. So, one, you are frequently taught, as an applicant, to file false financial information, with the idea of maximizing the federal scholarship. Two, the institutions do not deliver the promised education. They make all kinds of promises. As almost everybody in the United States knows, these for-profit schools are major advertisers, and it’s a bad sign. It’s usually on cable television after 11:00 PM, when a very high percentage of the ads are frauds. And these promise transformations, and they talk about the graduation rates, they talk about what kind of salary increase that you can expect. And there have now been hundreds of successful lawsuits against these, demonstrating in great detail- but only if you have the data, and hence DeVos’ action- that none of these promises come close to being met.
So, for example, they would talk about characteristic increases in your income after you get a degree of fifty, sixty thousand dollars. And they knew that A, the typical person entering these doesn’t complete the program, because A, they discover the program is so bad, but B, they frequently discover that they, in fact, don’t have the abilities in those particular programs. And the educational institution isn’t there to help and succeed. It is there solely to take money from them.
So, it’s the combination of types of frauds that, again, leave you- most typically, when you come out of these universities with no significant increase in your ability to get employed, and certainly no substantial salary increase- but again, most of the folks don’t even get the flaky degree and end up simply in debt and, not infrequently, in bankruptcy type situations.
GREGORY WILPERT: Of course, we need to remember that Donald Trump himself was a major owner of Trump University- the owner and the person behind Trump University, which itself has been accused of many of these practices. But unfortunately, we’ve run out of time. So, we’re going to have to stop here for now. I was speaking to Bill Black, associate professor of economics and law at the University of Missouri, Kansas City. Thanks again Bill for having joined us today, and congratulations on your granddaughter.
BILL BLACK: Feliz.
GREGORY WILPERT: And thank you for joining The Real News Network.
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If only it had been possible for a President to push these investigations and prosecutions for the time period just after the global crash to about a year or so ago. A lot of these bad actors may have found themselves before courts of law instead of being part of the present Administration. Remind me who was President during that time period again?
I am disappointed that professor Bill Black did not give a shoutout to bipartisan Bankruptcy Bill author Joe Biden.
…or Hillary’s vote *for* that bill.
In fact, his “easy prediction” that Trump would be most corrupt even ignores Obama’s contribution to the culture of criminality at the top of our public policy apparatus. Not only did Obama not prosecute the war crimes of Bush / Cheney, he promoted the torturers and prosecuted the whistle blowers. Black himself documents in excruciating detail just how little Obama did to prosecute what’s arguably the largest theft in human history (the sub-prime/derivatives meltdown).
I’m not sure Trump deserves the coveted “most corrupt” trophy, but I certainly understand why people voted with their middle finger, given his predecessor.
Hillary was absent for the vote of the actual bill that became law.
But her position had “evolved” over time, as the bankruptcy bill was promoted three times before it became law.
1. First Lady Clinton opposed an earlier 2000 bill enough to encourage Bill Clinton to pocket veto it in early 2001.
2. As NY senator in 2001, HRC changed her mind and supported a later, similar version that did not become law.
3. As NY senator, HRC abstained from the vote on the bill that did become law , claiming she needed to take care of Bill Clinton’s health issues and couldn’t (??) vote.
Of this august senatorial body of 100 senators, only ONE senator abstained.
74 yeas, 25 nays and the HRC abstention.
Here are the Democratic Senate supporters of the bill, from (https://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=109&session=1&vote=00044}
Baucus (D-MT)
Bayh (D-IN)
Biden (D-DE)
Bingaman (D-NM)
Byrd (D-WV)
Carper (D-DE)
Conrad (D-ND)
Inouye (D-HI)
Johnson (D-SD)
Kohl (D-WI)
Landrieu (D-LA)
Lincoln (D-AR)
Nelson (D-FL)
Nelson (D-NE)
Pryor (D-AR)
Reid (D-NV)
Salazar (D-CO)
Stabenow (D-MI)
Note, prominent Democrats Joe Biden, Harry Reid and Robert Byrd all voted for the bill that became law.
While HRC voting yea or nay would not have affected the outcome, perhaps the abstention was a valuable signal to the financial industry that she would be an ally when needed.
I did corner Stabenow in person at a get together held tp promote her candidacy in Michigan. Candidates feel safe when approached by an old white guy with silver hair. In turn, I cited the stats of how many students were delinquent, in default, the total amount loaned out to students, and how student loans was indenturing them to a life time to the financial industry of paying back debt.
The answer was, “we do not control the Senate” and my return was, we did control the Senate once and did little to relive the circumstance. Moments later a Univ. of Michigan lobbyist troll (Tom Batts) came up to argue with me about Income Based Repayment plans. It was a statement and not a discussion. The plans are not working.
The 2005 Credit Card Issuer Protection Act?
Misnamed the Bankruptcy Fraud and Abuse and Consumer Protection [sic] Act?
Bill Clinton deserves a shout out here, too!
A For-Profit College Company Paid Bill Clinton Millions of Dollars. Is That a Scandal?
http://www.slate.com/blogs/moneybox/2016/09/06/bill_clinton_earned_millions_from_a_for_profit_college_company.html
“Laureate Education is the world’s largest for-profit college operator, a behemoth that enrolls more than 1 million students, online and on campus, at 87 schools across 28 different countries. And, as the Washington Post recounts in a long feature this week, the company paid former President Bill Clinton some $17.6 million over five years to act as its “honorary chancellor”—a job that mostly involved letting the company refer to him as its “honorary chancellor.”
Thanks for reminding us of this fact.
Biden performed as paid. His donors in the Delaware banking community got what they required. His constituents got some small benefit due to the multiplier effect of that banking community income.
See how easy it is to gin up some rationale to explain away destructive legislation?
While Betsy DeVos is hamstringing the Department of Education, Mick Mulvaney is wreaking havoc in the Consumer Financial Protection Bureau (CFPB). Mick Mulvaney will close down the CFPB Student Loan Lending Office, according to a bureau-wide memo.
“The CFPB Student Loan office has been responsible for returning $750 million in relief to students and for investigating the troublesome student lender Navient.” The office sued Navient in 2017 for unfair and abusive loan practices, which is pretty much an industry wide practice. If there is one student loan lender I have heard repeated complaints about by Alan Collinge and the Student Loan Justice Org., it is Navient. The Student Lending Office also investigated and sued for-profit education company Corinthian Colleges.
Mick is reorganizing the CFPB to keep an eye on it and bring it under his control minimizing the number of investigations it makes. He had complained about the CFPB while a SC Representative.
We are losing two effective offices in the fight to return sanity and bankruptcy to student loans, something which exists for most people including Trump who has availed himself of bankruptcy multiple times after he could no long borrow against assets which stopped appreciating.
Why are blacks and latinos mainly going to these for profit colleges in the first place?
What prevents them from going to the local state university or college?
I understand they cannot usually go to ivy league but surely there are other opportunities for them than the fraudulent Trump University https://en.wikipedia.org/wiki/Trump_University
It is always tricky to answer a question that goes to motive. Who knows, really, why anyone does anything? But with that caveat, let me suggest a few things.
1) Even state schools have entrance requirements. The application process takes time and people can be rejected.
2) Many, if not most, of the people who fall prey to these frauds have been told they are not good enough to get into a regular school. Even if they haven’t been directly told that, they may believe it. Much of what passes for k-12 “education” is designed to demonstrate to children their shortcomings. And/or they may have already applied to a state school and been turned down.
3) The ads these “schools” run are aimed at desperate people. They are usually targeted career ads that say things like “Become a nurse in 180 days!” All you have to do to apply is call a phone number or send in a tear-off reply that asks for only your name, address and phone number. They are not selling educations, they are selling careers, diplomas and specific training certifications, pointedly. They are ubiquitous on public transportation where weary riders sit idle contemplating the crappy conditions in which they live and move.
Just considering these three points does not give one the answer to what motivates people to fall prey to fraud, but it goes a long way to explaining how this particular fraud can be successful, and how it can be disproportionately successful among Latinx and Black populations given the financial imperative to “earn” a living, the disservice of traditional schooling and the current racist structure of society.
Just to be clear, the article does not say Latinx and Black people mainly go to these fraudulent schools, it says the people who fall victim to these places are mainly Black and Latinx. There is a world of difference between those two statements. Turn the question around. Why do white kids generally avoid these frauds? Is it because they are inherently more savvy (a racist presumption) or could it simply be because they have no need to seek elsewhere for something the system (with its racially based rewards) already provides for them adequately?
Several reasons probably:
1) Because they don’t know any better, so say your young, have no life experience, very few relatives if any went to college or your parents don’t give you any guidance. This part is changing as people become more informed.
2) because they more easily accommodate the needs of those working full time, commuting, with kids etc.. Some state colleges have stepped up there online degree offerings so that is trying to meet the market where it actually exists by more legitimate entities. So yes if state colleges offer serious alternatives like online degrees etc. this might change.
2) because some programs are overcrowded, like nursing, there is not enough positions provided by city and state colleges period to meet current demand, so people go into those types of programs at for-profit schools (and if the demand is great enough in a field may land jobs despite going to a for-profit school). Sure they would get a better education with less debt IF state colleges were able to fill the need but if they fall down on the job … well people do what they must.
This is not the first ceased investigation of wholesale extraction operations that disproportionately harm our children and the poor:
https://www.washingtonpost.com/news/energy-environment/wp/2017/08/21/trump-administration-halted-a-study-of-mountaintop-coal-minings-health-effects/
The theme here -the fox guards the hens: Interior Dept halts study on practice that everyone knows destroys our lands and (often poor) mountain communities; Education Dept halts investigation on practice that everyone knows destroys our (often poor) youth. Instead the foxes protect the donor class as they extract all they can either from our lands, our children, or our future wellbeing.
The theme here -the fox continues to guard the hens:
Please, tell me when it was not so.
My post does not imply that the fox guarding is limited to any one time frame, yet thank you for adding a bold modifier so we are all on the same page. Bill Black uses the same analogy in the interview above, specifically heads of organizations designed to do one thing and protect a certain interest, do the opposite and enrich a competing interest. Not at all saying foxes are confined to any one adminstration – surely not. Just providing another relevant (within the last year) brazen example to add to the one Black discusses.
I was reasonably happy with the choice of Elizabeth Warren to head the CFPB.
I suppose if any Trump supporter had gone to college, they might care.
yea it is logical if they care about things that impact them more directly. Like improving working conditions and pay for all those who didn’t go to college. The need is for: unionization, higher wages, cheaper rents and healthcare, labor law to be enforced, job and industrial policy. That is what the working class really needs, not people like Hillary prattling on about how the answer to everything is more education.
But still it’s disproportionately people in the working class or their children who get ripped off by for-profit colleges.
So, um, Trump is pro-unions? Pro-rent controls? Pro-labor laws?
I understand that Hillary was a horrible choice, but why do you even bother to drag her up? Is that your contribution to this? Hillary, Hillary, Hillary! My comment was cynical, sarcastic and humorous.
Working class people DO get ripped off by for-profit colleges, but I can’t believe you would choose to criticize Clinton rather than point out that The Donald owns a for-profit college which has been successfully sued for being exactly what we thought it was: a fraud.
If you wonder why there are no solutions to these problems, try rereading your comment and figure out why it is utterly unproductive.
It’s not Hillary, it’s the whole Dem estab and their refusal to move off the ‘identity politics’ thing and start talking economics for the rest of us again. They used to do that in the long long ago. They used to win elections at all levels. sigh….
I think Jrs comment can be taken as complementary to yours, although perhaps without the crafty, groundbreaking, trump-bashing humor that only you possess (well except for Samantha Bee, Steven Colbert, Trevor Noah, come to think of it every comedian ever right now). Without the Bushes, Clintons, and Obamas of the world pushing the Because Bootstraps Model: “its a new world, you need to adapt, you need to get an education” or the expectation they created that education=good jobs there would necessarily not be the demand for for profit degree mills, and even trump university. I don’t see how Jrs logic is counterproductive.
Education, like healthcare, is an industry in America. It’s about brands rather then education. A dimwit with an Ivy League diploma gets the job instead of the sharp kid from a community college. University administrators get paid hundreds of thousands, if not millions, while classes are taught by part-time grad students on minimum wage and no benefits.
To paraphrase Pinckney, “Millions for defense but not one cent for education or healthcare!” This is not a Republican sickness; it’s bipartisan. It’s simply American. Guns, not butter. Bombs, not books….and so on.
Caveat: I teach at a for-profit business school in Europe. I am part-time help and get paid lower than minimum wage when I add up all the time I spend. But this is just for kicks and giggles and because I love teaching.
And as a final aside about Hillary, since she came up for no particular reason to begin with, it was astonishing that the Democrats could manage to find a candidate so appalling that even Trump beat her.
Well, you see, they did…
I think the party electoral college might have been tilted a bit.
Agreed. Hillary is (hopefully) a has-been. I don’t think she was ever that bad, but I had trouble discerning her policy positions from her husband’s during his presidency, and I’m pretty sure we didn’t need more of that. The right’s demonization of Hillary is overblown beyond measure. What will come of it is that they aren’t demonizing liberalism like Reagan did, so we can probably now get an actual liberal president.
It will serve them right.
I opposed Hillary on principle. I believe that no spouse or child (and grandchildren possibly) of an elected official should be allowed to hold public office or be appointed or hired by the government in any capacity. Hillary is nepotism. While she is smarter than GW, it’s the pinciple of the thing.
In a way, I am happy that America got Trump. Or I was. It gave me hope that the American political system would change. Instead, it simply made everyone more ignorant, more entrenched and more unwilling to learn about reality.
Bring on the asteroid.
When I was getting fired in 2008 I was looking for certifications, Called an online Ed. college that’s name sounded like another
reputable institution.
“So if the Pell Grant does not apply I end up in debt?”
“Yes.”
“I am not doing that.” I said.
“I’m just a salesman.” said the advisor.
Money, Ideology, Compromise & Ego, MICE are handle
motives. The For Profit Colleges either with their online
operations or their sit in a room of chairs ops, are
just something to sell on the basis of making you,
the ignorant working class person coming from
poverty & facing a life of poverty, more of a human capital
unit than you are without a degree.
Let us agree the primary motive of Trump U was
to make money & attracted people whose motivation
was money.
When thinking about what jobs the Government
Can pay willing excess workers to do that does not
compete with private industry I decided paying
citizens to go to school is the best Federal Jobs Guarantee.
I mean this on a few broad levels even to the point of
to have “Going To School” as a physical requirement
where you must teach what you know, and learn what
you want & what the nation needs its citizens to know.
For my model of an airport nation I intend all to learn
to fly at the expense of the nation regardless of airline
captaincy seats. The nation will have a complete fleet.
3D printed planes will be common.
Being a pilot is good for the mind. (Some of my ED
theory while on the subject.)
SINCE these schools net the small fish of society through
Television Ads would we support a Bill Paying For TV
Ads Telling People about High School, & Colleges & Certifications
that are free & reputable?
Is there a failure of the Public Service Announcement System here?
This is a great piece. My only criticism is that the non for profit colleges are a bunch of wastrels as well.
I was promised the starting quarterback role on the varsity team if I attended Southern New Hampshire University online, but went with another bowl contender-University of Phoenix, as they assured me that i’d get selected in the first round of the NFL draft.
very funny. right, if i borrow this money you mean i have to pay it back? you mean like my folks did for our former house in 2005?