In our recent story on the Trump administration’s decision to roll back protections for potentially millions of student loan borrowers, we also told you about new Department of Education advisor Taylor Hansen, a former lobbyist for the for-profit college industry whose father is the CEO of a student loan debt collection company that has been suing Taylor’s new employer since 2015 for the right to charge thousands of dollars in fees to people who are already having trouble paying back their loans. Now comes news that Hansen’s brief life as a federal employee has come to an end.
Bloomberg notes that Hansen apparently resigned his Dept. of Education post on Friday, the day after his new boss, Education Secretary Betsy DeVos, had advised student loan debt collectors to disregard a 2015 Ed. Dept. directive forbidding them from charging additional collection fees on certain defaulted borrowers.
Hansen’s father is former Deputy Secretary of Education Bill Hansen. The elder Hansen is now CEO of a company called USA Funds, which collects on defaulted student loans through the public-private Federal Family Education Loan (FFEL) Program.
FFEL no longer issues new loans, but there are still some 7 million borrowers repaying $162 billion in borrowed FFEL money.
In 2015, in the middle of a lawsuit filed by a student loan borrower against USA Funds, the Education Department advised FFEL collection companies that they were to no longer charge collection fees on defaulted FFEL borrowers who met the following conditions: the borrower responds within 60 days of a final notice, enters into a repayment and rehabilitation agreement, and abides by that agreement.
Prior to that determination, companies like USA Funds had been able to hit any defaulted borrower with fees as high as 18.5% of the total amount owed on the loan (that has since been dropped to 16%). The 2015 guidance from Ed. Secy. Arne Duncan didn’t stop collectors from charging these fee on all borrowers; just those who met those very specific criteria.
USA Funds sued the Department in response to the guidance, arguing that Secy. Duncan had effectively created a new rule without going through the lengthy and often contentious rulemaking process, which includes a public comment period.
That lawsuit is still ongoing, but recent court filings indicate that — in light of last week’s turnabout on this policy — the government is looking to quietly end this dispute with USA Funds.
A rep for the elder Hansen told Bloomberg that Taylor had not been asked by USA Funds to intervene on the company’s behalf with the Department of Education or Secy. DeVos.
While our attempts to get comment from the Department of Education were fruitless (no one answered the phone and the voicemail was no longer accepting messages), a spokesman for the agency tells Bloomberg that Taylor Hansen recused himself from anything to do with the USA Funds dispute.
On Friday, before Hansen’s departure from the Department was made known, Sen. Elizabeth Warren (MA) sent a letter [PDF], to Secy. DeVos, raising concerns about the hire of Hansen and another high-level aide.
Sen. Warren questioned Hansen’s background and the timing of his hire. Before joining the administration, Taylor had spent years as a lobbyist for Career Education Colleges and Universities (formerly known as the Association of Private Sector Colleges and Universities).
During Hansen’s time with CECU, the organization unsuccessfully tried to sue the Dept. of Education to stop the so-called “Gainful Employment” rule that would hold colleges accountable for their students’ ultimate ability to earn a living. Additionally, this was one of the issues that Hansen lobbied lawmakers on while employed at CECU.
And, as Sen. Warren notes in her letter, “Shortly after the Department publicly listed Mr. Hansen as an employee, the Department announced a delay of critical deadlines related to the implementation of the Gainful Employment rules.”
The letter also questions another recent hiring by Secy. Devos, Robert Eitel, a former VP at Bridgepoint Education — the for-profit operator of schools like Ashford University and University of the Rockies. Aside from having concerns about installing a high-ranking for-profit college executive in the regulatory agency that oversees his former industry, Warren points out that Bridgepoint reached a $23.5 million settlement with the Consumer Financial Protection Bureau in 2016, over allegations that the educator deceived students into taking out private student loans that cost more than advertised.
Bridgepoint, says Sen. Warren, is “currently under investigation by the Department of Justice, the Securities and Exchange Commission, the New York Attorney General, the North Carolina Attorney General, the California Attorney General, and the Massachusetts Attorney General.”