When a shady for-profit college like Corinthian or ITT Tech shutters its doors, it's terrible news for the students, who are stuck with a mountain of debt and not even a nominal degree. But it's also bad for taxpayers, who subsidize a lot of the student loans that kept these failing schools afloat.
For that reason, the Department of Education has rules to safeguard taxpayers from for-profit college failures: schools that participate in financial aid programs are subject to an audit, and those that fail the audit have to obtain a letter of credit, effectively setting aside funds or collateral that will cover taxpayer and student losses if the school goes under.
But according to new reporting from The Intercept, Education Secretary Betsy DeVos has quietly been letting the most at-risk colleges continue to operate without a letter of credit. These education companies include the Career Education Corporation and Bridgepoint, both of which have faced sanctions for lying to students about job placement and credentials — and DeVos' top assistant, Robert Eitel, happens to have been a vice president at both of these companies.
If any of these schools fail, taxpayers are likely to be on the hook for covering more of the loss — and with no need to put up collateral, these schools can hire more and more students who are at risk of being left out to dry.
DeVos has taken several steps to reverse the Obama administration's consumer protections on college students, rolling back debt relief programs for enrollees at schools that committed fraud, and moving to eliminate rules that require colleges show their graduates are gainfully employed.