A pilot program with the aim of delivering student loans through prepaid bank cards is vulnerable to a conflict of interest, Education Secretary Betsy DeVos was warned during a hearing on Tuesday.
DeVos, however, dismissed those concerns, and later appeared to know very little at all about the card program.
The Education Department’s Office of Student Aid is planning to launch the pilot program this year, dispersing loans to as many as 100,000 students via prepaid cards, similar to debit cards. The initiative would be administered by a vendor that has not yet been chosen by the department.
During Tuesday’s proceedings before the House Education and Workforce Committee, Rep. Mark Takano (D-Calif.) pressed Secretary DeVos about three department officials with close ties to the credit card industry, including A. Wayne Johnson, the head of Federal Student Aid.
“All have previous ties to financial firms like MasterCard, Citibank, and Bank of America, and they are working on implementation of the pilot card program,” Takano said, raising the possibility of conflicts of interest.
“Can you testify today that the pilot program will not be implemented by the best-connected firm, but by the firm that will best serve our students,” the congressman asked.
“All of those who work within the Department of Education take their ethics agreements very seriously and are bound to them,” Secretary DeVos responded, without commenting on the specifics of the program.
The student load card initiative, announced by the department in January, has been received with skepticism from education groups and other lawmakers. Democratic Senators, including Dick Durbin (D-Ill.), Elizabeth Warren (D-Mass.), and Sherrod Brown (D-Ohio), wrote a letter to Secretary DeVos earlier this year with concerns about the program.
They wanted to know what sort of spending data would be collected about students, and if it would be used by financial firms to market other products in the future. Senators also inquired about the types of spending restrictions that would be applied to the card.
To Rep. Takano’s point, the letter also asked what steps the Federal Student Aid office is taking to “safeguard against conflicts of interest in the pilot program.”
On Tuesday, Rep. Alma Adams (D-N.C) also asked why the program was even necessary, but Secretary DeVos didn’t appear familiar with basic details.
“I’m curious about what the rationale for these cards are,” asked Rep. Adams.
“I’m sorry?” DeVos responded, appearing to not understand the question.
“He talked to you about the student loan disbursements and the cards,” Rep. Adams said, referring to the prior questioning from Rep. Takano.
“Cards?” DeVos responded, again confused. Adams moved on to her next question.
The Department of Education’s plan for prepaid student loan cards is far from novel. Schools have previously offered student loans on cards backed by banks. But those arrangements often carried high transaction costs, siphoning off federal aid to banks through fees.
The Obama Administration issued a regulation in 2015 preventing schools from leveling “excessive and confusing fees” on students using financial aid cards.
Truthout Is Preparing to Meet Trump’s Agenda With Resistance at Every Turn
Dear Truthout Community,
If you feel rage, despondency, confusion and deep fear today, you are not alone. We’re feeling it too. We are heartsick. Facing down Trump’s fascist agenda, we are desperately worried about the most vulnerable people among us, including our loved ones and everyone in the Truthout community, and our minds are racing a million miles a minute to try to map out all that needs to be done.
We must give ourselves space to grieve and feel our fear, feel our rage, and keep in the forefront of our mind the stark truth that millions of real human lives are on the line. And simultaneously, we’ve got to get to work, take stock of our resources, and prepare to throw ourselves full force into the movement.
Journalism is a linchpin of that movement. Even as we are reeling, we’re summoning up all the energy we can to face down what’s coming, because we know that one of the sharpest weapons against fascism is publishing the truth.
There are many terrifying planks to the Trump agenda, and we plan to devote ourselves to reporting thoroughly on each one and, crucially, covering the movements resisting them. We also recognize that Trump is a dire threat to journalism itself, and that we must take this seriously from the outset.
After the election, the four of us sat down to have some hard but necessary conversations about Truthout under a Trump presidency. How would we defend our publication from an avalanche of far right lawsuits that seek to bankrupt us? How would we keep our reporters safe if they need to cover outbreaks of political violence, or if they are targeted by authorities? How will we urgently produce the practical analysis, tools and movement coverage that you need right now — breaking through our normal routines to meet a terrifying moment in ways that best serve you?
It will be a tough, scary four years to produce social justice-driven journalism. We need to deliver news, strategy, liberatory ideas, tools and movement-sparking solutions with a force that we never have had to before. And at the same time, we desperately need to protect our ability to do so.
We know this is such a painful moment and donations may understandably be the last thing on your mind. But we must ask for your support, which is needed in a new and urgent way.
We promise we will kick into an even higher gear to give you truthful news that cuts against the disinformation and vitriol and hate and violence. We promise to publish analyses that will serve the needs of the movements we all rely on to survive the next four years, and even build for the future. We promise to be responsive, to recognize you as members of our community with a vital stake and voice in this work.
Please dig deep if you can, but a donation of any amount will be a truly meaningful and tangible action in this cataclysmic historical moment.
We’re with you. Let’s do all we can to move forward together.
With love, rage, and solidarity,
Maya, Negin, Saima, and Ziggy