Trump and DOGE Decimate Department of Education Office of Inspector General

According to our sources at the US Department of Education, the number of personnel in its Office of Inspector General (OIG) is down approximately 14 percent from January 1, 2025.  The number of workers there could be further reduced as President Trump issues his austerity budget. The current loses at ED-OIG include retirements, those who have chosen to be part of the deferred resignation program, and those who left the organization for positions elsewhere. While this cutting may reduce personnel costs, what will happen with less OIG workers to oversee the proper use of federal funds?  Will this embolden bad actors, including predatory schools and debt servicers?  We're guessing it does.      

Last Email From A Worker at the US Department of Education

This graphic is part of an email from a US Department of Education official who was recently fired without good cause.  Our experiences with this dedicated public servant were always excellent, something we cannot say about others in the DC crowd. The graphic displays a number of important measures that have been enacted by ED-FSA (Federal Student Aid) over the last six years--and one giant failure, general debt relief for more than 30 million citizens. We wish the best for those Department of Education workers who remain, and who may see their jobs made more difficult, privatized, or moved to other agencies. The work cannot be easy for anyone--especially those who care about the folks they serve--the consumers and their families who are less likely to receive justice in the coming months and years. 

Related link:

Department of Education workers brace for Trump to shut agency down: ‘Everybody is distraught’ (UK Guardian)

Department of Education contract cuts spur ‘chaos and confusion’ (The Hill)

The Department of Education’s History Shows It is Essential (Time)

What now for the US Department of Education?

What happens now with the US Department of Education now that Elon Musk claims that it no longer exists? It's hard to know yet, and even more difficult after removing career government workers that we have known for years.  

We are saddened to hear of contacts we know who have been fired: hard working and capable people, in an agency that has been chronically understaffed and politicized. 

We also worry for the hundreds of thousands of student loan debtors who have borrower defense to repayment claims against schools that systematically defrauded them--and have not yet received justice. 

And what about all those FAFSA (financial aid) forms for students starting and continuing their schooling? How will they be processed in a timely manner?

Without funding and oversight, the Department of Education looks nearly dead. But with millions of poor and disabled children relying on Title I funding and IDEA and tens of millions more with federal student student loans, it's hard to imagine those functions disappearing for good.  

Let's see how much slack is taken up by private enterprise and religious nonprofits who may benefit from the pain. With student loans, much of the work has already been contracted out. It would not be out of the question for the student loan portfolio to be sold off to corporations who could profit from it. And that may or may not require Congressional approval.  

Elon Musk says US Department of Education no longer ‘exists’ (MSNBC)

Higher Education Inquirer Investigating White House, DOGE Communications

 

 

The Higher Education Inquirer (HEI) is investigating email communications between the White House and DOGE regarding the US Department of Education Federal Student Aid (FSA).  HEI has been using FOIA responses for a number of years to expose corruption in the US higher education business. The White House has 20 days to acknowledge receipt. We will let you know if and when we get any responses from the White House.  

U.S. Department of Education's Trump Appointees and America First Agenda

The U.S. Department of Education has announced a team of senior-level political appointees who will support the implementation of President Trump’s America First agenda.  

The Trump Administration, by Executive Order, has already required colleges and universities to eliminate diversity, equity and inclusion measures and schools are scrambling to be compliant with this new federal policy. New policies may also affect grants from the Department of Health and Human Services, which includes the Food and Drug Administration, the Centers for Disease Control and Prevention, and the National Institutes of Health.

Notable actions the Department of Education has already taken include: 

• Dissolution of the Department’s Diversity & Inclusion Council, effective immediately;
  • Background:The Diversity & Inclusion Council was established following Executive Order 13583 under then - President Obama. President Trump has rescinded the Executive Orders that guide the Council and issued a new Executive Order, “Ending Radical and Wasteful Government DEI Programs and Preferencing,” that terminates groups like the Diversity & Inclusion Council. DEI documents issued and related actions taken by the Council have been withdrawn.
• Dissolution of the Employee Engagement Diversity Equity Inclusion Accessibility Council (EEDIAC) within the Office for Civil Rights (OCR), effective immediately and pursuant to President Trump’s Executive Order “Ending Radical and Wasteful Government DEI Programs and Preferencing”;
• Cancellation of ongoing DEI training and service contracts which total over $2.6 million;
• Withdrawal of the Department’s Equity Action Plan;
• Placement of career Department staff tasked with implementing the previous administration’s DEI initiatives on paid administrative leave; and
• Identification for removal of over 200 web pages from the Department’s website that housed DEI resources and encouraged schools and institutions of higher education to promote or endorse harmful ideological programs.

At least four appointees to the Department of Education, as well as including incoming Secretary of Education Linda McMahon, have worked at the America First Policy Institute (AFPI). AFPI's higher education proposals are posted here and noted at the bottom of this article. AFPI has been accused of using dark money to prevent student loan forgiveness and its rhetoric clearly advances this agenda.

Rachel Oglesby – Chief of Staff

Rachel Oglesby most recently served as America First Policy Institute's Chief State Action Officer & Director, Center for the American Worker. In this role, she worked to advance policies that promote worker freedom, create opportunities outside of a four-year college degree, and provide workers with the necessary skills to succeed in the modern economy, as well as leading all of AFPI’s state policy development and advocacy work. She previously worked as Chief of Policy and Deputy Chief of Staff for Governor Kristi Noem in South Dakota, overseeing the implementation of the Governor’s pro-freedom agenda across all policy areas and state government agencies. Oglesby holds a master’s degree in public policy from George Mason University and earned her bachelor’s degree in philosophy from Wake Forest University. 

Jonathan Pidluzny – Deputy Chief of Staff for Policy and Programs 

Jonathan Pidluzny most recently served as Director of the Higher Education Reform Initiative at the America First Policy Institute. Prior to that, he was Vice President of Academic Affairs at the American Council of Trustees and Alumni, where his work focused on academic freedom and general education. Jonathan began his career in higher education teaching political science at Morehead State University, where he was an associate professor, program coordinator, and faculty regent from 2017-2019. He received his Ph.D from Boston College and holds a bachelor’s degree and master’s degree from the University of Alberta. 

Chase Forrester – Deputy Chief of Staff for Operations 

Virginia “Chase” Forrester most recently served as the Chief Events Officer at America First Policy Institute, where she oversaw the planning and execution of 80+ high-profile events annually for AFPI’s 22 policy centers, featuring former Cabinet Officials and other distinguished speakers. Chase previously served as Operations Manager on the Trump-Pence 2020 presidential campaign, where she spearheaded all event operations for the Vice President of the United States and the Second Family. Chase worked for the National Republican Senatorial Committee during the Senate run-off races in Georgia and as a fundraiser for Members of Congress. Chase graduated from Clemson University with a bachelor’s degree in political science and a double-minor in Spanish and legal studies.

Steve Warzoha – White House Liaison

Steve Warzoha joins the U.S. Department of Education after most recently serving on the Trump-Vance Transition Team. A native of Greenwich, CT, he is a former local legislator who served on the Education Committee and as Vice Chairman of both the Budget Overview and Transportation Committees. He is also an elected leader of the Greenwich Republican Town Committee. Steve has run and served in senior positions on numerous local, state, and federal campaigns. Steve comes from a family of educators and public servants and is a proud product of Greenwich Public Schools and an Eagle Scout. 

Tom Wheeler – Principal Deputy General Counsel 

Tom Wheeler’s prior federal service includes as the Acting Assistant Attorney General for Civil Rights at the U.S. Department of Justice, a Senior Advisor to the White House Federal Commission on School Safety, and as a Senior Advisor/Counsel to the Secretary of Education. He has also been asked to serve on many Boards and Commissions, including as Chair of the Hate Crimes Sub-Committee for the Federal Violent Crime Reduction Task Force, a member of the Department of Justice’s Regulatory Reform Task Force, and as an advisor to the White House Coronavirus Task Force, where he worked with the CDC and HHS to develop guidelines for the safe reopening of schools and guidelines for law enforcement and jails/prisons. Prior to rejoining the U.S. Department of Education, Tom was a partner at an AM-100 law firm, where he represented federal, state, and local public entities including educational institutions and law enforcement agencies in regulatory, administrative, trial, and appellate matters in local, state and federal venues. He is a frequent author and speaker in the areas of civil rights, free speech, and Constitutional issues, improving law enforcement, and school safety. 

Craig Trainor – Deputy Assistant Secretary for Policy, Office for Civil Rights 

Craig Trainor most recently served as Senior Special Counsel with the U.S. House of Representatives Committee on the Judiciary under Chairman Jim Jordan (R-OH), where Mr. Trainor investigated and conducted oversight of the U.S. Department of Justice, including its Civil Rights Division, the FBI, the Biden-Harris White House, and the Intelligence Community for civil rights and liberties abuses. He also worked as primary counsel on the House Judiciary’s Subcommittee on the Constitution and Limited Government’s investigation into the suppression of free speech and antisemitic harassment on college and university campuses, resulting in the House passing the Antisemitism Awareness Act of 2023. Previously, he served as Senior Litigation Counsel with the America First Policy Institute under former Florida Attorney General Pam Bondi, Of Counsel with the Fairness Center, and had his own civil rights and criminal defense law practice in New York City for over a decade. Upon graduating from the Catholic University of America, Columbus School of Law, he clerked for Chief Judge Frederick J. Scullin, Jr., U.S. District Court for the Northern District of New York. Mr. Trainor is admitted to practice law in the state of New York, the U.S. District Court for the Southern and Eastern Districts of New York, and the U.S. Supreme Court. 

Madi Biedermann – Deputy Assistant Secretary, Office of Communications and Outreach 

Madi Biedermann is an experienced education policy and communications professional with experience spanning both federal and state government and policy advocacy organizations. She most recently worked as the Chief Operating Officer at P2 Public Affairs. Prior to that, she served as an Assistant Secretary of Education for Governor Glenn Youngkin and worked as a Special Assistant and Presidential Management Fellow at the Office of Management and Budget in the first Trump Administration. Madi received her bachelor’s degree and master of public administration from the University of Southern California. 

Candice Jackson – Deputy General Counsel 

Candice Jackson returns to the U.S. Department of Education to serve as Deputy General Counsel. Candice served in the first Trump Administration as Acting Assistant Secretary for Civil Rights, and Deputy General Counsel, from 2017-2021. For the last few years, Candice has practiced law in Washington State and California and consulted with groups and individuals challenging the harmful effects of the concept of "gender identity" in laws and policies in schools, employment, and public accommodations. Candice is mom to girl-boy twins Madelyn and Zachary, age 11. 

Joshua Kleinfeld – Deputy General Counsel 

Joshua Kleinfeld is the Allison & Dorothy Rouse Professor of Law and Director of the Boyden Gray Center for the Study of the Administrative State at George Mason University’s Scalia School of Law. He writes and teaches about constitutional law, criminal law, and statutory interpretation, focusing in all fields on whether democratic ideals are realized in governmental practice. As a scholar and public intellectual, he has published work in the Harvard, Stanford, and University of Chicago Law Reviews, among other venues. As a practicing lawyer, he has clerked on the D.C. Circuit, Fourth Circuit, and Supreme Court of Israel, represented major corporations accused of billion-dollar wrongdoing, and, on a pro bono basis, represented children accused of homicide. As an academic, he was a tenured full professor at Northwestern Law School before lateraling to Scalia Law School. He holds a J.D. in law from Yale Law School, a Ph.D. in philosophy from the Goethe University of Frankfurt, and a B.A. in philosophy from Yale College. 

Hannah Ruth Earl – Director, Center for Faith-Based and Neighborhood Partnerships

Hannah Ruth Earl is the former executive director of America’s Future, where she cultivated communities of freedom-minded young professionals and local leaders. She previously co-produced award-winning feature films as director of talent and creative development at the Moving Picture Institute. A native of Tennessee, she holds a master of arts in religion from Yale Divinity School.

AFPI Reform Priorities

AFPI's higher education priorities are to:

• Reform America’s Dysfunctional Higher Education Accreditation System

• Rethink Public Financing of Postsecondary Study to Encourage Competition and Accountability

• Open New Pathways to Family-Sustaining Careers

• Combat the Politicization of Higher Education and Encourage Viewpoint Diversity on U.S. Campuses

• Protect Students’ and Professors’ First Amendment Rights

 Related links:

Trump's Education Department dismantles DEI measures, suspends staff (USA Today) 

California State University changes 'illegal' program that excluded White men (Fox News)

America First Policy Institute Team

America First Policy Initiatives

How President Trump's Executive Orders May Affect Higher Education (Glen McGhee)

Here are the key executive orders and actions President Trump has issued so far that may affect higher education:

1. Signed an executive order to dismantle diversity, equity, and inclusion (DEI) initiatives across federal agencies, including in higher education[4]. This order aims to end what the administration calls "divisive preferential hierarchy" in favor of merit-based systems[4].

2. Issued an order to freeze hiring at federal agencies, including the Department of Education[3]. This could potentially lead to a reduction in staff and expertise at the department.

3. Directed federal employees, including those in education-related agencies, to return to full-time in-office work, potentially ending telework arrangements[3].

4. Signed an order making it easier to remove career staffers in policy-related positions by reclassifying them as political appointees[3]. [[BELOW for analysis]]

5. Required companies with federal contracts to certify they do not maintain DEI programs defined as "discriminatory practices" by the order[4].

6. Authorized immigration enforcement on school campuses, which could affect international students and undocumented students in higher education[9].

These executive orders have already faced criticism and potential legal challenges from civil rights organizations, business leaders, and education advocates[4][7][8]. The full impact of these orders on higher education remains to be seen, as some may be tied up in courts or face legislative challenges[7].

Citations:
[1] https://edworkforce.house.gov/news/documentsingle.aspx?DocumentID=412157
[2] https://www.insidehighered.com/news/government/politics-elections/2025/01/20/now-office-how-trump-could-overhaul-higher-ed
[3] https://www.edweek.org/policy-politics/what-will-trumps-orders-for-federal-workers-do-to-the-education-department/2025/01
[4] https://www.diverseeducation.com/leadership-policy/article/15712680/trump-executive-order-targets-federal-dei-initiatives-drawing-swift-backlash
[5] https://www.chronicle.com/article/trump-has-issued-a-blitz-of-executive-orders-some-could-affect-higher-ed
[6] https://www.capradio.org/articles/2025/01/21/trump-is-signing-a-flurry-of-executive-orders-heres-how-those-work/
[7] https://www.washingtonpost.com/politics/2025/01/21/trump-executive-orders-challenges-lawsuits/
[8] https://www.presidentsalliance.org/press/presidents-alliance-reacts-to-harmful-impact-of-new-administrations-executive-orders/
[9] https://www.usatoday.com/story/news/education/2025/01/21/trump-executive-orders-immigration-schools/77851480007/
==========================================================
President Trump signed an executive order on January 20, 2025, that aims to make it easier to remove certain federal employees by reclassifying them into a new category called "Schedule Policy/Career"[1][2]. This order is a reinstatement of a similar policy from Trump's previous administration, which was known as "Schedule F"[1].

The key points of this executive order are:
1. It targets federal employees in "policy-influencing positions"[3].
2. It reclassifies these employees, potentially stripping them of civil service protections[2].
3. The order argues that this change is necessary to ensure accountability and loyalty to the President's policies[3]. 

Critics argue that this order:
1. Could lead to the politicization of the civil service[2].
2. Might result in career officials being dismissed for political reasons[2].
3. May affect tens of thousands of federal employees[7].

The legality of this executive order is being questioned, and federal worker unions are expected to challenge it in court[4][6]. The implementation of this order could significantly impact the structure and functioning of federal agencies, including the Department of Education[4].

Citations:
[1] https://www.meritalk.com/articles/president-reinstates-schedule-f-classification-for-feds/
[2] https://www.cnn.com/2025/01/20/politics/federal-employee-protections-trump-executive-order/index.html
[3] https://www.whitehouse.gov/presidential-actions/2025/01/restoring-accountability-to-policy-influencing-positions-within-the-federal-workforce/
[4] https://www.edweek.org/policy-politics/what-will-trumps-orders-for-federal-workers-do-to-the-education-department/2025/01
[5] https://www.pbs.org/newshour/show/trump-unleashes-wave-of-executive-orders-in-promised-overhaul-of-u-s-policies
[6] https://thehill.com/homenews/administration/5098444-federal-worker-union-sues-trump-schedule-f/
[7] https://www.washingtonpost.com/politics/2025/01/20/trump-schedule-f-reinstated/
[8] https://www.afge.org/publication/trump-order-politicizing-federal-workers-threatens-integrity-of-government-work-union-leader-says/

This Week in IPEDS - Winter 2023-24 Data Released; Update on Race/Ethnicity Collection and Reporting

1. Winter 2023-24 Data Released

NCES has released provisional data from the Winter 2023-24 collection. The Winter 2023-24 collection includes the following survey data: Graduation Rates for selected cohorts; Outcome Measures for cohort year 2015-16; Student Financial Aid, academic year 2022-23; and Admissions, Fall 2023. The data are currently available through the IPEDS Use the Data Page: https://nces.ed.gov/ipeds/use-the-data

2. Update on Statistical Policy Directive No. 15 Regarding Race/Ethnicity Collection and Reporting

As previously noted, all Departments within the Federal Government are in the process of implementing Statistical Policy Directive No. 15 (SPD 15): Standards for Maintaining, Collecting, and Presenting Federal Data on Race and Ethnicity. At this time, IPEDS has not yet announced any specific plans regarding changes to race/ethnicity reporting. However, Title IV-participating institutions should prepare for upcoming changes, which may as require updates to information systems.

An IPEDS Technical Review Panel meeting was recently held to discuss SPD 15, and the summary of that meeting will be available in the near future. Additionally, the Chief Statistician of the United States has shared more information about SPD 15 on this blog. Institutions are urged to begin or continue internal discussions to prepare for the forthcoming changes related to race/ethnicity data collection and reporting. These changes include the addition of a Middle Eastern or North African (MENA) race category and the introduction of a combined race/ethnicity question, which will replace the existing two-part question.

IPEDS Help Desk
1-877-225-2568
ipedshelp@rti.org

ACTION NEEDED: Proposed Rules on Student Debt Relief Based on Hardship (US Department of Education)

This is an opportunity for student loan debtors and their allies to voice their opinions about student loan debt relief. Tell them your stories and explain how this rule will help yourself and others. It can make a difference.  

The Secretary of Education proposes to amend the regulations related to the Higher Education Act of 1965, as amended (HEA), to provide for the waiver of certain student loan debts.  

The proposed regulations would specify the Secretary’s authority to waive all or part of any student loan debts owed to the Department based on the Secretary’s determination that a borrower has experienced or is experiencing hardship related to such a loan. 

DATES: The Department of Education must receive your comments on or before December 2, 2024.

ADDRESSES: Comments must be submitted via the Federal eRulemaking Portal at Regulations.gov. 

The specific page to make your comment is at https://www.regulations.gov/document/ED-2023-OPE-0123-32489. Once you get to that page, hit the comment button and make your comment. We suggest writing your comment out, then cutting and pasting it into the comment section.

Information on using Regulations.gov, including instructions for finding a rule on the site and submitting comments, is available on the site under ‘‘FAQ.’’ If you require an accommodation or cannot otherwise submit your comments via Regulations.gov, please contact regulationshelpdesk@gsa.gov or by phone at 1–866–498–2945.

After you submit your comment, you will receive a receipt like the one below.  

DeVos Funnels $250k to Musk’s Pro-Trump Super PAC (David Halperin)

Billionaire Betsy DeVos, who resigned from her job as Donald Trump’s secretary of education over Trump’s incitement of the deadly January 6 assault on the U.S. Capitol, has donated $250,000 to America PAC, the pro-Trump super PAC created by the world’s richest man, industrialist Elon Musk.

The Independent first reported the contribution, disclosed in a Federal Election Commission filing that covers the period October 1 to 16.

DeVos sent Trump a letter of resignation dated January 7, 2021, telling the then-president, “There is no mistaking the impact your rhetoric had on the situation, and it is the inflection point for me. Impressionable children are watching all of this, and they are learning from us.”

DeVos told Trump her decision to resign was “in support of the oath I took to our Constitution, our people, and our freedoms.”

On January 6, after Trump encouraged his supporters to march to the Capitol to fight the counting of electoral votes that would declare Joe Biden the winner of the 2020 presidential election, he sat and watched television as an armed mob violently attacked police officers and threatened the lives of Members of Congress and Trump’s own vice president, Mike Pence — who, like DeVos, has grounded his conservatism in a deep Christian faith. For hours, Trump repeatedly ignored the pleas of his staff to call off the rioters.

Now, while Pence has refused to support Trump’s 2024 election bid, DeVos has sent cash to help Trump become president again.

And it’s not as if Trump subsequently was revealed to be a Sunday school teacher.

Since leaving office, Trump has been impeached and indicted for encouraging the January 6 attack on our democracy and Constitution, for other efforts to cheat in the 2020 election, and for stealing classified documents from the White House. He was convicted in New York over the summer of 34 felonies for falsifying business records to hide his misconduct from voters in the 2016 election.

Trump’s central business enterprise, the Trump Organization, was in January 2023 fined $1.6 million by a New York state court after the company was convicted by a jury of 17 criminal felonies, including tax fraud and falsifying business records. Trump himself was found liable in February 2024 by a New York state judge for civil fraud and was ordered to pay a $355 million penalty.

And in May 2023, a New York federal jury in a civil case ordered Trump to pay E. Jean Carroll $5 million for battery and defamation after it found that Trump sexually abused Carroll in a department store dressing room in 1996.

But DeVos’s own version of morality makes her conversion back to Trumpism less than surprising.

As Trump’s Secretary of Education, DeVos hired as her top higher education advisors former executives of predatory for-profit colleges, and she trashed almost all the work done by the Obama administration to protect students against deceptive, over-priced schools. Instead of holding predatory colleges accountable, DeVos mocked broke students ripped off by these schools as people demanding “free money.”

DeVos as secretary also repeatedly attacked and demeaned public schools and criticized her own cabinet Department.

In August, DeVos appeared to revisit her view of Donald Trump, telling The Detroit News she was willing to join a new Trump administration “if it was with the goal of phasing out the Department of Education….”

DeVos and her husband’s wealthy family, which made its fortune through the troubling multi-level marketing company Amway, have been major donors to Republican candidates and right wing causes for decades. Two of DeVos’s brothers-in-law, and their two wives, gave $250,000 each to the Musk PAC.

[Editor's note: This article originally appeared on Republic Report.] 

How to Select the Best College Using the College Scorecard (FSA Outreach and Glen McGhee)

The Higher Education Inquirer appreciates your comments on this 2023 video produced by the US Department of Education, Federal Student Aid titled "Financial Aid Bootcamp: How to Select the Best College Using the College Scorecard."

While the College Scorecard provides valuable information, it's important for users to understand its limitations and consider multiple sources when making decisions about higher education. The tool continues to evolve, with ongoing efforts to enhance its accuracy and comprehensiveness. 

If there are other videos that you think would help consumers make better college and career choices, please let us know. 

Trump 2024 and the Student Loan Portfolio

The US Department of Education (ED) handles the student loans of about 40 million US citizens, holding on to about $1.6 Trillion in debt--which is considered an asset to the US government.  And ED-FSA (Federal Student Aid) hires tens of thousands of workers, mostly contractors, to service the debt. But that could change in a few years. If Donald Trump is elected President.  

Under President Trump, debtors might expect that their loans to be transferred over to large corporations--at some point--with the sale being used to reduce the federal deficit, and to cut labor at ED. This would aid in the effort to eliminate the US Department of Education, as Trump has promised on the campaign trail.

Selling off the student loan debt portfolio may or may not require approval from anyone outside of the President. At least one study, by McKinsey & Company, has already been conducted regarding this possibility. 

In 2019, the Trump administration hired McKinsey to analyze the $1.5 trillion federal student loan portfolio. This analysis was part of a broader effort to explore options for managing the portfolio, including potentially selling off some of the debt. Results were never published. The analysis was conducted alongside a study by FI Consulting, which focused on the economic value of the portfolio, noting that the valuation could vary depending on future default rates, prepayment rates, and economic conditions.

The new owners of the sold off debt would most likely be big banks and other large companies, both domestic and foreign, that find value in the debt. There would be political and social resistance.  And many questions would need to be answered, in detail.

Would large banks or other large corporations be better stewards of the debt?

Would the bidding be transparent?  

Would consumers be able to challenge loan repayments or ask for forgiveness?  

What would happen to the contracts of the existing debt servicers?  

Will this expand the existing Student Loan Asset-Backed Securities market? 

Related link:

The Student Loan Mess Updated: Debt as a Form of Social Control and Political Action

ED Completes Pre-Acquisition Review for University of Phoenix Deal. University of Idaho Continues Hiding Details of Transaction Fees, 43 Education "High-Risk" Bonds.

[Editor's note: This article will be updated as we receive more information.]

US Department of Education (ED) sources have told the Higher Education Inquirer that the Pre-Acquisition Review for the Idaho-University of Phoenix deal was completed in November 2023 in response to a request from the University of Phoenix in June of the same year.  

The University of Phoenix is currently owned by two powerful investment firms: Apollo Global Management and Vistria Partners. But those companies have been attempting to unload the for-profit college for more than two years. The latest potential owner is the University of Idaho's affiliate organization, Four Three Education--at an initial cost of $685 million.    

ED will not require anyone to post a Letter of Credit--despite the fact that Four Three Education currently has no financial assets and will likely have to issue high-risk bonds to acquire the University of Phoenix. 

Four Three Education, and the University of Idaho, may be responsible for compensating the Department of Education for successful Borrower Defense to Repayment (fraud) claims made by tens of thousands of consumers.  While that could amount to more than a billion dollars, the University of Idaho affiliate expects to spend much less by using aggressive legal means. 

Financing for the Phoenix project has been deliberately opaque. The University of Idaho, however, has acknowledged that it may be liable for some future losses, but only up to $10 million annually. And Idaho officials, including University of Idaho President C. Scott Green, seem undeterred by these potential problems.  

The Most Recent Court Case

A court case to determine whether the University of Idaho violated open meeting laws was completed last week.  Idaho District Judge Jason Scott ruled that the University of Idaho was not in violation for holding three secret meetings followed by a quick vote on May 18, 2023. The University of Idaho claimed that secrecy was essential for the deal to occur.

The State asserted that the Idaho Board of Education did not perform due diligence for the sale, relying on President Green and his word that this was a worthwhile deal for the University of Idaho. In turn, Green admitted he did not ask important questions about competition, for fear that he would be considered naive, and that he outbid the competition.  

As Judge Scott remarked, the wisdom of the deal was not on trial. If it had, perhaps the ruling would have been different. 

Information about the competition to buy the University of Phoenix continues to be sketchy. The University of Arkansas System rejected a deal from the University of Phoenix in April 2023, weeks before the last closed door meeting. UMass Global was mentioned in the court case, but with no evidence that they were ever a serious suitor. 

The Idaho-Phoenix Scheme

The University of Idaho spent a reported seven million dollars on consultants over two months to determine whether the deal would be profitable to the University of Idaho. But little is publicly known about how the funds were spent. Hogan Lovells, President Green's former employer, was one of the organizations involved in consulting the University of Idaho. A local law firm, Hawley Troxell was also involved.  

Idaho also created a non-profit organization, Four Three Education, to act as a firewall in the event the school loses money. The current President of the University of Phoenix, Chris Lynne, will remain in place and be a member of the Four Three Education Board. 

The University of Idaho claims that the University of Phoenix will make a $150 million annual profit but they have not produced evidence. Information about Phoenix's assets are also limited, but Idaho claims the for-profit college holds $200 million in cash. How liquid (or how restricted) the cash is has not been mentioned.

Funding for the sale will be through an initial debt of $685 million, which includes more than $100 million in transaction fees. When bond interest is included, the deal is likely to cost billions of dollars according to an industry source. In an opinion piece in the Idaho Statesman, Rod Lewis, a former attorney for Micron Technology and former president of the Idaho State Board of Education stated:

Phoenix will issue $685 million in corporate bonds anticipated to be “bb” rated (known as “high risk” or “speculative” bonds). Phoenix’s estimated debt service will be $60 million to $70 million per year. It sounds risky, and it is.

We will know more when the University of Idaho produces the bond contracts and names the bond underwriters.    

Poisoning the Public Higher Ed Well

The University of Phoenix relies heavily on obfuscation, intimidation, political lobbying, and lawsuits to reduce expenses related to fraud. Given recent data on consumer complaints about the University of Phoenix, University of Idaho officials say they are prepared for contingencies related to the tens of thousands of Borrower Defense to Repayment claims. But the school or its affiliated organizations could also be liable for claims related to questionable business practices in the present and future. 

It's too early to tell whether Idaho will profit from its acquisition. But if the sale is consummated, the University of Phoenix will join a growing list of state-affiliated and non-profit robocolleges, one that includes Purdue University Global (formerly Kaplan University) and University of Arizona Global Campus (formerly Ashford University), two schools that have not lived up to their parent company names.

Related links:

Predatory Colleges, Converted To Non-Profit, Are Failing (David Halperin, Republic Report)

University of Phoenix's Sinking Ship: Who is Chris Lynne?

University of Phoenix and the Ash Heap of Higher Ed History

Fraud Claims Against University of Phoenix Continue to Mount

How University of Phoenix Failed. It's a Long Story. But It's Important for the Future of Higher Education.

The Slow-Motion Collapse of America’s Largest University

The Growth of "RoboColleges" and "Robostudents"

Sotheby's Institute of Art on Department of Education's Heightened Cash Monitoring 2 List

Sotheby's Institute of Art (SIA) in New York City is one of only three institutions under the US Department of Education's Heightened Cash Monitoring 2 list for "financial responsibility" problems. 

SIA is owned by Cambridge Information Group, which is the parent company of ProQuest, The School of the New York Times, Hammond's Candies, the Scranton/Wilkes-Barre RailRiders minor league baseball team, and other investments. 

(Seven NY institutions were under HCM2. Source: US Department of Education)

According to the US Department of Education (ED), "schools may be placed on HCM1 or HCM2 as a result of compliance issues including but not limited to accreditation issues, late or missing annual financial statements and/or audits, outstanding liabilities, denial of re-certifications, concern around the school's administrative capabilities, concern around a school's financial responsibility, and possibly severe findings uncovered during a program review."

Also according to ED, "a school placed on HCM2 no longer receives funds under the Advance Payment Method. After a school on HCM2 makes disbursements to students from its own institutional funds, a Reimbursement Payment Request must be submitted for those funds to the Department." Schools in this position are often in such financial hardship that they may close.  

The September 2023 Heightened Cash Monitoring 2 list includes less than 100 schools nationwide and seven schools in New York. A disproportionate number of schools are small religious-based institutions and for-profit vocational colleges. 

Unlike most of the schools on the HCM list, Sotheby's has a prestigious name--and it uses its relationship with the auction house to elevate its brand. According to its vision statement, "Sotheby’s Institute of Art is the global leader in art world education, shaping future generations of cultural stewards and art market professionals."  

And according to its website "Sotheby’s Institute of Art alumni form a network of over 8,000 talented individuals around the world. Our graduates hold leading positions at renowned international arts organisations including Frieze, 1-54 Contemporary African Art Fair, M+, the Institute of Contemporary Photography, the Victoria & Albert Museum, the Guggenheim Abu Dhabi, the Smithsonian Museum of Natural History, the Fine Art Group, the UK National Archives, Cartier, and numerous other galleries, auction houses, museums, luxury brands, art fairs, advisories, law firms and beyond."

The US Department of Education's College Navigator indicates that SIA's student population in the US is about 200. Tuition alone is $56,340 per year. The school's US faculty includes one full-time instructor and 35 part-timers. 87 percent of the students are female; 49 percent are Asian. The school only offers certificates and graduate degree programs. SIA's website does not appear to name any Board members.  

US Department of Education (IPEDS) data also suggest that SIA's expenses have surpassed revenues since 2016-17.  

(Source: US Department of Education)

The Higher Education Inquirer is in the process of gathering more information about the school's finances and whether students should be aware of the HCM status. Other schools on the list have recently closed or are in the process of closing, including Bay State College, King's College, and Union Institute.  

Related links: 

Ambow Education Facing Financial Collapse

A preliminary list of private colleges at risk