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May152018

Exclusive: Former for-profit college executive shaped Education Department policy that could benefit former employers: Documents

Joe Raedle/Getty Images(WASHINGTON) -- A senior U.S. Department of Education official hired straight out of the for-profit college sector helped dismantle regulations designed to protect student defrauded by for-profit colleges into taking out five-figure loans on promises that they would get good jobs — a move that could benefit his former employers, according to emails obtained exclusively by ABC News.

Education Department adviser Robert Eitel, hired by the Trump administration last February after four years in the for-profit college industry, played a role in suspending an Obama-era policy known as "borrower defense to repayment." The rule made it easier for students, enticed into taking out five-figure loans on promises that they would get good jobs, to file for debt relief. It also allowed the government to recoup the losses from the schools.

Ultimately, those potentially most impacted include many predominantly low-income, and minority students disproportionately represented at for-profit colleges and often saddled with high student loans and facing poor job prospects.

Education Department Staffing

Education policy changes involving for-profit colleges has been a touchy subject since Secretary Betsy DeVos, who entered office with investments tied to the for-profit college sector, took over the department following Trump’s election.

The revelations about Eitel's engagement in borrower defense policy come on the heels of a New York Times report that the department has been dismantling a team investigating widespread abuses by for-profit colleges. Education spokeswoman Liz Hill told the Times the group shrunk because of attrition and said no new hires with ties to the for-profit college industry had influenced the group's work.

Eitel, who had also worked as an Education Department attorney under President George W. Bush, isn't the only for-profit college executive DeVos has brought into the Department. The secretary also drew ire when she tapped Julian Schmoke, Jr., a former dean at the for-profit college DeVry, to lead the department's Student Aid Enforcement Unit last August.

There's no indication Schmoke was involved in the delay of the borrower defense rule.

Eitel — a former vice president at two for-profit college operators, Bridgepoint Education and Career Education Corp. — joined the Trump administration in February as part of a so-called "beachhead team" formed to usher the agency through the transition.

For two months, he worked at the Education Department while on unpaid leave from Bridgepoint, according to financial disclosure forms. He formally gave up his position at Bridgepoint in April, when he was hired on a permanent basis as a senior adviser to DeVos.

Although Education Departments ethics officials maintain working on borrower defense wouldn't have violated his ethics agreement, Eitel has up until now refused to say publicly whether he had a hand in the borrower defense delay.

Eitel's Involvement in Borrower Defense

On June 14, DeVos announced she was suspending the borrower defense rule, arguing that under the rule, "all one had to do was raise his or her hands to be entitled to so-called free-money."

Emails obtained by the executive branch watchdog group Democracy Forward and shared with ABC News show in the days leading up to the announcement, Eitel circulated borrower defense talking points to staffers, edited background documents, and even signed off on the official delay notice.

"I have attached the draft backgrounder... together with draft talking points," he wrote in one email to department staff about the borrower defense delay in June.

"I had approved a prior version but want to make sure that it reads the same," he said in another that same month.

Democracy Forward called Eitel's involvement in policy affecting his former employer "incredibly troubling."

"It obviously raises some serious problems for someone with his background to be involved," Rachael Klarman, the organization’s legal analyst, told ABC News. "I think there's a reason the administration has been cagey... it's literally foxes guarding the henhouse."

Asked for comment, Education Department spokesperson Liz Hill referred ABC News to correspondence between Betsy DeVos, ethics officials, and Democratic Sen. Elizabeth Warren.

Before he was hired, Eitel signed an ethics pledge, which he explained as a promise to "recuse myself from matters, particular matters, involving specific, prior employers that I've worked for in the past."

In a letter to Warren, DeVos said ethics rules didn't bar Eitel from working on borrower defense policy, as long as he recused himself from adjudicating specific borrower defense claims, including claims against his former employers.

Career Education Corp. is facing more than 1200 claims; Bridgepoint faces around 200.

Ethics rules forbid only "particular matters involving specific parties that are directly and substantially related to his former employers (e.g., a contract, litigation, a grant)," ethics officials noted in another letter to Warren.

"Bob Eitel is a true civil servant, so it’s disappointing to see ABC News carrying water for left-wing ideologues who are actively working to try and discredit the important work that Secretary DeVos is doing to repair the damage done by the prior administration," Education Department press secretary Liz Hill told ABC News when asked for comment on this story. "He has gone above and beyond what is required by law to recuse himself from matters involving his former employer and has operated in an ethical and transparent manner."

Bridgepoint and Career Education Corp. did not immediately respond to ABC News' request for comment.

Cost of the Rule

For-profit college operators — including Bridgepoint, Bob Eitel's former employer — have said that dismantling the Obama rule could save them money.

According to Education Department estimates, students filing for discharge under Obama's borrower defense rule could have recovered billions of dollars — and experts say offending institutions could potentially be liable for the entire sum.

The borrower defense rule could "result in the imposition of significant restrictions on us and our ability to operate," Bridgepoint wrote in an SEC filing last March, adding that claims made under the rule "could damage our reputation in the industry and have a material adverse effect on enrollments and our revenues."

According to Tressie McMillan Cottom, a former for-profit college recruiter who says she left the industry because of its aggressive recruiting tactics, Eitel, Devos, and the rest of the education Department appear more focused on schools' concerns than on students.

"What I think Devos and this administration understand their role to be is, defend the schools," Cottom said. "In trying to make it an unfriendly, inefficient process, the administration is saying, we're going to protect these institutions."

"When you look behind the curtain and see what's going on, you have someone whose former employer stood to benefit from the decisions he made — did benefit from the decisions he made," Democracy Forward policy director Corey Ciorciair said.

Of course, for-profit colleges weren't the only institutions decrying the Obama-era borrower defense rule. Historically black colleges and universities argued that the increased scrutiny could prompt institutions to funnel money toward lawyers disputing frivolous claims, rather than spending it on educating the nation's neediest students.

Borrower Defense Explained

The revelations over Eitel's involvement come in the wake of a scandal over for-profit colleges' predatory recruitment of students qualifying for federal loans.

Following the closure of two major for-profit college operators, Corinthian Colleges in April 2015 and ITT Technical Institute in 2016, more than 70,000 students filed for federal loan forgiveness, claiming they'd been duped by colleges' fraudulent statements about job prospects or credit transfers.

The vast majority of these claims — more than 98 percent, according to report by a progressive think tank, the Century Foundation — were lodged against for-profit colleges like Corinthian, ITT Technical, the University of Phoenix, and Devry.

The Obama administration created an office to handle the problem and sought to shore up rules requiring fraudulent schools to reimburse the government, passed just three months before Obama left office and set to be implemented in July 2017.

"The borrower defense rule was acknowledging, for perhaps the first time in the history of higher education, that for a group of students, going to college had made their lives worse, because the debt outweighed any positive impact that these schools might have given them," explained Cottom, the former for-profit enrollment officer now a professor at Virginia Commonwealth University, a public research institution.

But according to an inspector general's report released in December, although the Education Department received more than 25,000 claims in the first six months of the Trump Administration — bringing the total number of outstanding claims to nearly 70,000 — the borrower defense unit was instructed "not to submit additional claims for approval... because borrower defense policies are being reviewed with the change in administrations."

Staffing was cut dramatically, from 30 people to just six, and the department did not approve a single claim.

Just before the regulations would have kicked in, Devos officially, indefinitely pressed pause.

Attorneys general from 19 states sued, claiming she "abruptly" violated federal law. The claim is still pending in federal court.

Meanwhile, the Education Department is in the midst of writing "new regulation that will treat students, institutions, and taxpayers fairly."

Eitel on the delay

In the months following DeVos' announcement, Eitel refused to tell lawmakers whether he had a hand in the delay.

At a congressional hearing in November, Eitel, citing the rulemaking in progress, said it would be "inappropriate" for him to comment on borrower defense regulations.

"Was the postponement your idea?" Rep. Val Demings, D-Fla, asked.

"To say that it was my idea would not be accurate. There is an entire infrastructure in place at the department that deals with borrower defense matters," Eitel replied.

"Are you involved in the rewrite?" Demings countered.

"It...no," he responded. "That matter is undergoing negotiated rulemaking as we speak, and I cannot comment on negotiated rulemaking that is occurring presently."

Stalling tactic?

Delaying the rule "is a shot across the bow to other for-profits that says, look, Donald Trump and Betsy DeVos don't care if you go out and prey on vulnerable students," Ciorciair said.

Since the indefinite postponment of the Obama-era rules, the Department announced its ruling on 21,000 loan forgiveness claims under the old rules: 12,900 approvals and 8,600 denials.

Around 55,000 students await a decision.

Cottom said the administration's approach basically boils down to a "stalling tactic."

"There has been a lot of successful organizing amongst students pushing back on things like student loan debt and institutional fraud," she said. "The delays are really designed, I think, to blunt all of that activity."

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