When Banks Lost Control of the Student Loan Mess

History can be many things. It can be both informative and purposely deceptive. And from time to time, historical events need to be revisited if we seek the truth. We also find critical historical analysis essential when we think about US higher education and student loan debt from a People's perspective.

In a previous article we said Best and Best's classic The Student Loan Mess needed to be updated and reexamined. Although the book was an exceptional chronicle of the student loan industry from 1958 to 2013, it missed at least one key event, the 2008-2010 bailout of Sallie Mae and a number of banks who made questionable private loans guaranteed by the US government. This lesson is especially important if the US government decides to get out of the student loan business or reduce government oversight of student loans.

From 1965 to 2010, the federal government was a backstop for private student loans, Guaranteed Student Loans, also known as the FFEL loans. Annual volume of private loans skyrocketed, from $5B in 2001 to over $20B in 2008, when 14 percent of all undergraduates had one. A secondary market for private student loan debt (student loan asset-backed securities) also began to flourish. An industry group, America's Student Loan Providers (ASLP), provided political cover for private lenders.

In 2007, President George W. Bush signed the College Cost Reduction and Access Act of 2007 (HR 2669) which cut subsidies to lenders and increasing grants to students. But this did little to contain the growing mountain of student loan debt. A mountain of unrecoverable debt that was crushing millions of consumers as the US was facing an enormous economic crisis, the Great Recession.

In rereading The Student Loan Mess, we also discovered that these private entities had not only made questionable loans, some private lenders had also bribed university officials to become preferred lenders. How commonplace this student loan grift was has not been adequately explored.

In 2008, the Bush government began a bailout of these private lenders, the Ensuring Continued Access to Student Loans Act (ECASLA), which amounted to $110B. This event occurred largely without notice. And because a larger Great Recession was happening, the ECASLA never received much media attention.

As part of Health Care and Education Reconciliation Act of 2010, President Obama's takeover of the Guaranteed Student Loan program in 2010, did get attention. Ending the Guaranteed Student Loan program was supposed to save the US government $66B over an 11-year period. This rosy projection never materialized. The FFEL loans acquired by the U.S. Department of Education (ED) during the transition to the Direct Loan program are now part of the Direct Loan portfolio. The U.S. Department of Education (ED) acquired an additional $20.4 billion in face amount of FFEL loans from lenders during the transition from the FFEL program to the Direct Loan program.

The FFEL loans that were not acquired by the U.S. Department of Education (ED) during the transition to the Direct Loan program remained with the original private lenders. These loans continue to be serviced by the private lenders that issued them.

For-profit colleges, the engine for much of this bad debt, did get scrutiny, and from 2010 to 2023, their presence was reduced. But overpriced education and edugrift continued in many forms. And after a short respite from 2020 to 2024, the mountain of bad student loan debt continues to grow.

Related links:

A Report on the Loan Purchase Programs Created by ECASLA

Student Loan Debt Clock

America's Student Loan Providers | C-SPAN.org

Student Loan History (New America)

Maximus AidVantage Contracts with the US Department of Education Publicly Available

The Higher Education Inquirer has received all the current contracts between the US Department of Education and Maximus/AidVantage through a Freedom of Information Act (FOIA) request. Maximus serves millions of student loan debtors and has faced increased scrutiny (and loss of revenues) for not fulfilling their duties on time. 

The FOIA response (23-01436-F) consists of a zip file of 998 pages in 5 separate files. HEI is sharing this information with any news outlet or organization for free, however we would appreciate an acknowledgement of the source. 

We have already reached out to a number of organizations, including the Student Borrower Protection Center, the Debt Collective, the Project on Predatory Lending, the NY Times, ProPublica, and Democracy Now!  We have also posted this article at the r/BorrowerDefense subreddit. 

Seventh Quarterly Report under Settlement Agreement in Sweet, et al. v. Cardona (US Department of Education)

The latest report regarding Borrower Defense to Repayment settlements has been published. National Student  Loan Data System records indicate that discharges have been fully processed for at least 195,5908 Class Members eligible for relief. Refunds have been fully processed for at least 194,782 Class Members eligible for relief.  

Borrower Defense to Repayment is a debt forgiveness strategy for consumers if they believe they were defrauded by a school and can document that fraud. The Project on Predatory Student Lending (PPSL) has provided assistance to thousands of consumers defrauded by for-profit colleges and still offers help. 

For consumer support regarding about Borrower Defense claims, we also recommend joining the r/Borrower Defense group on Reddit.  

List of Schools with Strong Indicators of Misconduct, Evidence for Borrower Defense Claims

Here (below) is a list of schools where there are strong indicia of misconduct, per the Department of Education and/or the Department of Justice. 

Student loan debtors who have attended these schools, and believe they were defrauded, are encouraged to file Borrower Defense to Repayment claims if they haven't already. 

More than 750,000 Borrower Defense fraud claims have been filed, and tens of thousands have resulted in debt forgiveness. Folks can also join the r/BorrowerDefense group on Reddit for support and guidance.  

Alta Colleges, Inc. (Westwood)

• Westwood College

American Commercial Colleges, Inc.

• American Commercial College

American National University

• American National University

Ana Maria Piña Houde and Marc Houde

• Anamarc College

Anthem Education Group (International Education Corporation)

• Anthem College
• Anthem Institute

Apollo Group

• University of Phoenix
• Western International University

ATI Enterprises

• ATI Career Training Center
• ATI College
• ATI College of Health
• ATI Technical Training Center

Baker College

B&H Education, Inc.

• Marinello School of Beauty

Berkeley College (NY)

• Berkeley College

Bridgepoint Education

• Ashford University
• University of the Rockies

Capella Education Company (Strategic Education, Inc.)

• Capella University

Career Education Corporation

• American InterContinental University
• Briarcliffe College
• Brooks College
• Brooks Institute
• Collins College
• Colorado Technical University
• Gibbs College
• Harrington College of Design
• International Academy of Design and Technology
• Katharine Gibbs School
• Le Cordon Bleu
• Le Cordon Bleu College of Culinary Arts
• Le Cordon Bleu Institute of Culinary Arts
• Lehigh Valley College
• McIntosh College
• Missouri College of Cosmetology North
• Pittsburgh Career Institute
• Sanford‐Brown College
• Sanford‐Brown Institute
• Brown College
• Brown Institute
• Washington Business School
• Allentown Business School
• Western School of Health and Business Careers
• Ultrasound Diagnostic Schools
• School of Computer Technology
• Al Collins Graphic Design School
• Orlando Culinary Academy
• Southern California School of Culinary Arts
• California Culinary Academy
• California School of Culinary Arts
• Pennsylvania Culinary Institute
• Cooking and Hospitality Institute of Chicago
• Scottsdale Culinary Institute
• Texas Culinary Academy
• Kitchen Academy
• Western Culinary Institute

Center for Employment Training

• Center for Employment Training

Center for Excellence in Higher Education (CEHE)

• California College San Diego
• CollegeAmerica
• Independence University
• Stevens‐Henager

Corinthian Colleges, Inc.

• American Motorcycle Institute
• Ashmead College
• Blair College
• Bryman College
• Bryman Institute
• CDI College
• Duff's Business Institute
• Eton Technical Institute
• Everest
• Everest University Online
• Everest College Phoenix
• Florida Metropolitan University
• Georgia Medical Institute
• Heald College
• Kee Business College
• Las Vegas College
• National Institute of Technology
• National School of Technology
• Olympia Career Training Institute
• Olympia College
• Parks College
• Rochester Business Institute
• Sequoia College
• Tampa College
• Western Business College
• WyoTech

Computer Systems Institute

• Computer Systems Institute

Court Reporting Institute, Inc.

• Court Reporting Institute

Cynthia Becher

• La' James College of Hairstyling
• La' James International College

David Pyle

• American Career College
• American Career Institute

Delta Career Education Corporation

• McCann School of Business & Technology
• Miami‐Jacobs Career College
• Miller Motte Business College
• Miller‐Motte College
• Miller‐Motte Technical College
• Tucson College

DeVry

• American University of the Caribbean
• Carrington College
• Chamberlain University
• DeVry College of Technology
• Devry Institute of Technology
• DeVry University
• Keller Graduate School of Management
• Ross University School of Veterinary Medicine
• Ross University School of Medicine

EDMC/Dream Center

• Argosy University
• The Art Institute (including The Art Institute of Atlanta, The Art Institute of California, and more)
• Brown Mackie College
• Illinois Institute of Art
• Miami International University of Art & Design
• New England Institute of Art
• South University
• Western State University College of Law

Education Affiliates (JLL Partners)

• All‐State Career School
• Fortis College
• Fortis Institute

Edudyne Systems Inc.

• Career Point College

Empire Education Group

• Empire Beauty School

Everglades College, Inc.

• Everglades University
• Keiser University

FastTrain

• FastTrain

Full Sail University

Globe Education Network

• Globe University
• Minnesota School of Business

Graham Holdings Company (Kaplan)

• Bauder College
• Kaplan Career Institute
• Kaplan College
• Mount Washington College
• Purdue University Global

Grand Canyon Education, Inc.

• Grand Canyon University

Infilaw Holding, LLC

• Arizona Summit Law School
• Charlotte School of Law
• Florida Coastal School of Law

International Education Corporation

• Florida Career College
• United Education Institute

ITT Educational Services Inc.

• ITT Technical Institute

JTC Education, Inc.

• Gwinnett College
• Medtech College
• Radians College

Laureate Education, Inc

• Walden University

Leeds Equity Partners V, L.P.

• Florida Technical College
• National University College
• NUC University

Liberty Partners

• Concorde Career College
• Concorde Career Institute

Lincoln Educational Services Corporation

• International Technical Institute
• Lincoln College of Technology
• Lincoln Technical Institute

Mark A. Gabis Trust

• Daymar College

Mission Group Kansas, Inc.

• Wright Business School
• Wright Career College

Premier Education Group L.P.

• American College for Medical Careers
• Branford Hall Career Institute
• Hallmark Institute of Photography
• Hallmark University
• Harris School of Business
• Institute for Health Education
• Micropower Career Institute
• Suburban Technical School
• Salter College

Quad Partners LLC

• Beckfield College
• Blue Cliff College
• Dorsey College

Remington University, Inc. (Remington College)

• Remington College

Southern Technical Holdings, LLC

• Southern Technical College

Star Career Academy

• Star Career Academy

Strayer University

Sullivan and Cogliano Training Center, Inc.

• Sullivan and Cogliano Training Centers

TCS Education System

• Chicago School of Professional Psychology

Vatterott Educational Centers, Inc.

• Court Reporting Institute of St Louis
• Vatterott College

Wilfred American Education Corp.

• Robert Fiance Beauty Schools
• Robert Fiance Hair Design Institute
• Robert Fiance Institute of Florida
• Wilfred Academy
• Wilfred Academy of Beauty Culture
• Wilfred Academy of Hair & Beauty Culture

Willis Stein & Partners (ECA)

• Brightwood Career Institute
• Brightwood College
• New England College of Business and Finance
• Virginia College