- Obama’s DOE Goes After For-Profit Colleges
- Obama’s DOE Regulations Devalue For-Profit Schools, Leaving Them Desperate
- Corinthian Students Left in the Cold, Vistria Comes Out Unscathed
While Congress debates student loan collection policies, Peter Schweizer Drills Down on the Obama Insiders who left the Education Department and cashed in with For-Profit Universities.
Some are big losers in the student loan crisis. Let me tell you about the Obama education insiders who came out way ahead.
Hi, I’m Peter Schweizer, and this is The Drill Down, where we drill down on cronyism and corruption in Washington D.C.
Since she started as Secretary of Education in 2017, Betsy DeVos has been criticized heavily by the Democrats in Congress. She’s been called anti-teacher[i], anti-public school[ii], and now, “anti-student” by President Trump’s political opponents.
This last charge stems from her recent decision to ignore a federal judge’s order that the Department of Education stop collecting student loan payments from the former students of several for-profit schools. Corinthian Colleges, Incorporated owned several of these for-profit colleges, which offered students flexible educational opportunities. But the company went out of business and was forced to shut them all down in 2015[iii], leaving students to pay back loans they took out to pay for schools that no longer exist.[iv]
Despite a judge’s order, DeVos decided against forgiving these student debts. Instead, she implemented a new policy with little or no debt forgiveness for students who are now earning a substantial income.[v][
While some of these criticisms for DeVos may seem fair, a little context might help to understand how all this happened.
During Barack Obama’s presidency, his first Education Secretary, Arne Duncan, conducted regulatory meetings with for-profit schools. As I detail in my book, Secret Empires, Duncan and his deputy, Tony Miller, would impose regulations on for-profit schools, and then discuss them with certain Wall Street investors. Hedge funds would then use this information to guide their investments.[vi]
These hedge funds weren’t the only ones making money from this set-up. Marty Nesbitt, a close friend of Obama’s, was recruiting several members of the Obama administration to come to work for his new private equity investment firm, called Vistria. He created the firm in 2013, right at the start of Obama’s second term. Among the first people he hired? Tony Miller, from the Department of Education. Miller’s old boss at the DOE, Arne Duncan, would later work out of the firm’s Chicago office after he left in late 2015.
Maybe hiring Tony Miller was based on merit. Or perhaps it had something to do with his insider knowledge of regulating for-profit schools.
Whatever the real answer, Vistria got to work quickly, looking to buy some of the same corporations targeted by Obama’s new regulations on for-profit schools.[vii] After the Obama White House imposed rules that decimated the value of these companies[viii], Vistria, and Obama’s good friend Nesbitt, and other connected investors would swoop in and purchase them for pennies on the dollar.[ix]
The University of Phoenix, for example, was owned by something called the Apollo Education Group. In 2015, the Federal Trade Commission started investigating Apollo “regarding potential deceptive advertising, sale or marketing of its services to students.”[x]
The investigation put the school on probation from the federal student loan program.[xi] The value of Apollo’s stock plummeted as a result. From $11.29 a share in October 2015 to just $6.38 three months later. Apollo’s stock fell 90 percent from January of 2009 when Obama first took office.[xii]
Faced with those losses, Apollo needed investors… fast. And Vistria, with its many connections to the Department of Education, was happy to help.
With four Obama insiders involved, Vistria met with Department of Education officials and other top Democrats to gain approval for the deal.
One House Republican noted, “It’s ironic that a former senior official at the Department of Education – an agency that has intentionally targeted and sought to dismantle the for-profit college industry – would now take the reins at the country’s largest for-profit college.”[xiii]
Ultimately, Vistria was able to buy Apollo for $1.14 billion dollars, a tenth of what the company had been worth in 2009. Vistria now had a hand in the business of for-profit colleges, and they quickly began running their competition out of business.
Competition like… Corinthian Colleges, Inc.
Just before he left the Education Department for the private sector, Arne Duncan mentioned that he was “thrilled to be able to close down Corinthian.”[xiv]
Corinthian’s collapse left “tens of thousands” of students without financial relief when Obama left office. And Vistria, a new player in the industry stocked with some of his administration’s most senior education officials, had one less major competitor.
So, while Betsy DeVos may deserve the congressional scrutiny over her handling of loans for Corinthian’s former students, it’s worth asking how they got in that fix in the first place.[xv] Those students may end up being the losers in this situation, but many former Obama education insiders came out way ahead.
I’m Peter Schweizer, and this is the Drill Down. For more episodes, follow us on social media, or visit drilldowntv.com
- Madeline Will, “Teachers Push Back Against Betsy DeVos’ Claim That Schools Are in the ‘Industrial Era,’” Education Week Teacher, March 8, 2018, https://blogs.edweek.org/teachers/teaching_now/2018/03/betsy_devos_innovation_industrial.html.
- “Betsy DeVos and Her No Good, Very Bad Record on Public Education,” Education Votes, March 22, 2019, https://educationvotes.nea.org/2019/03/22/devos/.
- Allie Bidwell, “For-Profit Corinthian Colleges Shuts Down All Remaining Campuses,” U.S. News, April 27, 2015, https://www.usnews.com/news/articles/2015/04/27/for-profit-corinthian-colleges-shuts-down-all-remaining-campuses.
- Danielle Douglas-Gabriel, “Feds Found Widespread Fraud at Corinthian Colleges. Why Are Students Still Paying the Price?” Washington Post, September 29, 2016, https://www.washingtonpost.com/news/grade-point/wp/2016/09/29/feds-found-widespread-fraud-at-corinthian-colleges-why-are-students-still-paying-the-price/.
- Erica L. Green, “DeVos Halts Partial Debt Relief Policy After Judge Slams Procedures,” June 6, 2018, New York Times, https://www.nytimes.com/2018/06/06/us/politics/betsy-devos-student-debt-relief.html?module=inline.
- Katelyn Caralle, “Obama Used Executive Powers to Benefit Close Friends’ Private Investment Firms: Book,” Washington Examiner, March 20, 2018, https://www.washingtonexaminer.com/politics/obama-used-executive-powers-to-benefit-close-friends-private-investment-firms-book.
- Melissa Harris, “Executive Profile: Martin Nesbitt, the First Friend,” Chicago Tribune, January 21, 2013, https://www.chicagotribune.com/business/ct-xpm-2013-01-21-ct-biz-0121-executive-profile-nesbitt-20130121-story.html.
- Allie Grasgreen, “Obama Pushes For-Profit Colleges to the Brink,” Politico, July 1, 2015, https://www.politico.com/story/2015/07/barack-obama-pushes-for-profit-colleges-to-the-brink-119613.
- Michael Stratford and Kimberly Hefling, “Bid to Buy For-Profit College by Former Obama Insiders Raises Questions,” Politico, June 29, 2016, https://www.politico.com/story/2016/06/former-obama-insiders-seek-administrations-blessing-of-for-profit-college-takeover-224917.
- Angela Gonzales, “University of Phoenix Parent Under FTC Investigation, Stock Drops,” Phoenix Business Journal, July 29, 2015, https://www.bizjournals.com/phoenix/news/2015/07/29/university-of-phoenix-parent-under-ftc.html.
- Dan Sagalyn, “Pentagon Puts For-Profit University of Phoenix on Probation,” PBS, October 9, 2015, https://www.pbs.org/newshour/education/pentagon-puts-profit-university-phoenix-probation.
- Matt Jarzemsky, Dana Cimilluca, and Austen Hufford, “Apollo Global Management in Talks to Buy Apollo Education,” Wall Street Journal, January 11, 2016, https://www.wsj.com/articles/apollo-education-to-explore-strategic-alternatives-1452516388.
- Stratford and Hefling, “Bid to Buy For-Profit College by Former Obama Insiders Raises Questions.”
- Shahlen Nasiripour, “Arne Duncan ‘Thrilled’ to Close Corinthian Colleges, Not So Ready to Help Its Former Students,” Huffington Post, July 2, 2015, https://www.huffpost.com/entry/arne-duncan-corinthian-thrilled_n_7715366.
- Greg Mellen, “Corinthian Colleges Students Stunned by Closure,” Orange County Register, April 28, 2015, https://www.ocregister.com/2015/04/28/corinthian-colleges-students-stunned-by-closure/.