It’s no secret that President Biden and likeminded lawmakers are committed to achieving mass student loan forgiveness to blatantly buy the votes of nearly 15 million twenty-somethings. In the lead-up to the 2020 election, then-candidate Biden made the promise a cornerstone of his campaign. Many observers interpreted the platform as a concession to far-left Democrat voters, with whom support was flagging, that demanded “free college” and cancellation of as much as 95 percent of student debt. Whatever the case, the President and his advisors seem to have drank their own KoolAid; the White House has repeatedly advertised that since “day one” President Biden has worked to “fix” the student loan system through “debt cancellation.”
Indeed, the Biden Administration sought to make good on its promise in 2022, when it introduced a plan to cancel up to $20,000 of student loans for certain qualifying students. The White House’s most recent budget proposes doubling the size of Pell grants but excludes career colleges, which the Administration has sought to paint as “predatory” institutions, despite evidence to the contrary. The Administration has repeatedly touted its record of “holding schools accountable” for high tuition cost increases, though its enforcement has disproportionately targeted for-profit institutions.
The Administration’s 2022 $400 billion student debt cancellation plan was foiled by the U.S. Supreme Court, which in a 6-3 decision less than a year later ruled that the proposal violated Executive Branch authority. The Court’s ruling stated: “While Congress specified in the Education Act a few narrowly delineated situations that could qualify a borrower for loan discharge, the Secretary has extended such discharge to nearly every borrower in the country. It is ‘highly unlikely that Congress’ authorized such a sweeping loan cancellation program.”
Nevertheless, the Biden Administration has persisted in its mission. Citing an obscure legal settlement, Sweet v. Cardona, the Department of Education has handed down $45 million in penalties to over 90 colleges as political cover to start erasing more than $11 billion of federal student loans via group discharges. This appears to be the Administration’s strategy, spearheaded by the Department of Education—dredge up dirt on schools, however contrived, and then use those allegations, however flimsy, as grounds to dismiss student debt.
This scheme has always been the plan: Swing for the fences, but at least get student loans paid off at schools that are forced to close because of unmitigated and capricious government regulations from the Department of Education, or whose reputations have been sufficiently discredited through the same.
However, the President and his advisors seem to have realized that such sweeping action would require cover fire. Their biggest problem, namely, was students themselves. Generation Z, which the Wall Street Journal dubbed the “Toolbelt Generation,” has made an exodus from traditional four-year colleges and universities. Making up the overwhelming majority of American college students, they decline to participate in disruptive rallies and woke culture, and instead opt for higher ed alternatives, like career and vocational colleges, with the intention of finding a job, contributing to their local communities, and repaying their loans.
The Biden Administration seemed to recognize early on that it would need to reframe the narrative around shuttering career colleges in order to achieve its student debt cancellation promises. As AAF reported previously, the President began to stack the bench early in his administration at key agencies, with appointments like Richard Cordray—known partisan cronies that have spent their careers attempting to gut unconventional higher education options and the businesses that support them.
ORGANIZING ACTIVISTS TO LAUNCH A ‘LAWFARE’ CAMPAIGN AGAINST SUCCESSFUL ENTERPRISES
Taking the lead from the Obama Administration, the Biden Administration’s original target was career colleges, which differ from conventional public and private colleges, universities, and community colleges because they frequently operate as commercial enterprises by paying taxes and returning shareholder value. (By contrast, public and private colleges, universities, and community colleges are tax-exempt and provide no returns to investors, pensioners, and retirees.) However, Team Biden expanded its hit list to include many other successful businesses and vendors that efficiently serve these traditional colleges, such as Online Program Managers and student loan servicers.
Yet, even the Administration would need to build public support to advance its goals, lest it be confronted by concerned stakeholders and lawmakers who would recognize the legislative overstep.
Whether by good luck or good coordination, the White House found a fertile field of activists to carry its water. Following the 2016 election, a swarm of former Obama Administration bureaucrats exited the public sector to start or join student advocacy organizations, which continued to beat the student debt forgiveness drum. And, fortuitously, many of these groups found a patron in the John & Laura Arnold Foundation, which provided a $20 million seed investment to launch a concerted litigation campaign against successful businesses in the higher ed sector.
With the stage set, these groups initiated a campaign of “lawfare”—series of lawsuits meant more to publicly deface education businesses than protect the students they ostensibly represent. Even before President Biden was elected, these activists began to poison the well of public opinion against higher education businesses, seeding the field for the Biden Administration to pursue student loan forgiveness.
This roster of well aligned “experts” also provided a resonance board for the Administration to legitimize its own policies. The Department of Education knew it could count on these organizations to endorse its policies, provide supporting research and messaging, and even fill policy-making boards to rubberstamp its rule changes. This created a cyclical process; these essentially shell organizations could validate the Administration’s policies and positions and hand up policy recommendations, and the Administration in turn could use the support as evidence to advance its positions.
What’s more, as this investigation will explain in greater detail, this cadre of organizations had begun to build a vast network of contacts at State Attorney Generals offices years before President Biden’s election. It then leveraged those relationships to drum up supposedly organic state-level support for its policies, creating a veneer of grassroots support and diverting attention away from the Department of Education.
PROTECTING THE STATUS QUO: THE BIDEN ADMINISTRATION’S MISSION TO PROP-UP ANTIQUATED, WOKE COLLEGES
More than a year ago, AAF provided evidence of how the Biden Administration was weaponizing the student loan process to eliminate successful businesses serving in the higher ed sector.
Students were fleeing traditional four-year colleges in favor of career colleges, remote learning, and other unconventional higher education options. This created a hitch for the Administration. Traditional colleges are not only bastions of progressive ideology; they are also ardent supporters of wide-scale student debt cancellation and the liberal promise of “free college.”
A 2020 analysis found that non-profit and state-supported higher education institutions contributed over $64 million to Democrat candidates in 2018, more than eight-times more than went to Republican candidates. The top three recipients were Senator Bernie Sanders, Senator Elizabeth Warren, and Mayor Pete Buttigieg, who were “the loudest champions of free college education and student debt relief,” the analysis notes.
During the 2020 election cycle, non-profit and state-run colleges, universities, and employees contributed nearly $340 million to federal candidates—making the sector the sixth largest political contributor in the U.S. Ninety percent of those donations were to Democratic candidates. In 2023, non-profit and state-funded institutions spent $96 million on federal lobbying and employed over 1,100 lobbyists. The entire career college sector, by contrast, spent under $5.5 million—less than a third of what Ivy League schools alone spent.
Debt cancellation for conventional non-profit, public, and private is big business for these schools. Student loan forgiveness, for example, would shift financial liabilities off the schools’ books and onto taxpayers’ backs. Likewise, brand-name schools generally are equipped with massive financial endowments, which are used to fund programming, marketing, and recruitment—needs that smaller schools are turning to business innovators to fill—and which provide a huge advantage over smaller competitors. Only about a quarter of tuition goes to instruction, according to a 2022
study.
What’s more, well-established colleges and universities enjoy preferential treatment from policymakers in Washington, which explains their lavish spending to protect the status quo. A study this year by OpenTheBooks.com found that Stanford, Northwestern and the Ivy League universities have collected more than $33 billion in grants and contracts and another $12 billion in tax breaks on their massive endowments over the last five years.
BEYOND CAREER COLLEGES TO ONLINE PROGRAM MANAGERS AND LOAN PROCESSORS
Virtually all successful businesses in the higher education industry exist to meet a need. Consider OPMs, for example. The businesses provide the technology, services, resources, and expertise required to build and deploy online programming– capabilities that many schools lack. They allow schools, particularly smaller schools, to significantly reduce or offload start-up costs and liabilities, which is often necessary to launch a program.
Yet, last year the Department of Education proposed new guidance to establish significant control over colleges’ and universities’ contractual agreements with OPMs. While ostensibly the rule change was meant to broaden the scope of “thirdparty servicers,” as Inside Higher Ed reported, it put OPMs “squarely in the center of the bull’s-eye.” At the same time, the Department of Education announced a review of the Incentive Compensation Rule and the ”bundled services,” the regulatory framework underpinning OPM business models.
In truth, the Department of Education’s real goal is “full-access regulatory review of colleges’ contracts and the elimination of these expert intermediaries, putting the full burden of online programming on the shoulders of inexperienced administrators,” former Secretary of Education William Bennett wrote in November 2023.
Within weeks the “third-party servicer” proposal was withdrawn. The House Education Chairwoman blamed the Department for “incompetency, poor planning, a failure to think through the serious implications of its proposal, a lack of respect for the concerns of postsecondary institutions, and tone-deafness to private businesses and students.”
The Higher Education Loan Authority of the State of Missouri (MOHELA) offers another example of the Administration’s efforts to snuff out disruptors that threaten its control over higher education institutions. Established in 1981 by the Missouri Legislature, MOHELA is a “quasi-governmental entity,” which allows it to operate independently even though it is an “instrumentality” of the state. Among its operations, the organization services student loans.
Largely unknown for the first 40 years of its existence, MOHELA featured prominently in the U.S. Supreme Court’s Biden v. Nebraska ruling, in which the Court struck down President Biden’s $400 billion student loan forgiveness plan. The Court’s decision notes that the Administration’s plan “would cost MOHELA, a nonprofit government corporation… $44 million a year in fees,” which “is necessarily a direct injury to Missouri itself.”
The Department of Education retaliated against MOHELA by siccing its advocacy organization comrades on it, which this paper discusses in greater detail, even though MOHELA did not file and had no role in the state’s involvement in the Biden v. Nebraska lawsuit. In fact, an analysis by the Roosevelt Institute and the Debt Collective found that MOHELA stood to gain if President Biden’s plan had moved forward.
The Administration’s tunnel-visioned mission to discredit, penalize, and eliminate successful businesses—and, more broadly, any organization that is not specifically a federal agency—has real life implications: It hurts parents, fulltime workers, minorities, veterans, and first-generation college students who tend to choose unconventional higher education options in much greater proportions than traditional college-age students from middle- or upper-class families. In other words, the Biden team’s aversion to any disruption in higher education invariably reduces student choice and forces students into programs that may not be well suited to their educational needs.