Government

Education Dept. Appointee’s For-Profit Past Draws Flak, but It’s Complicated

August 31, 2017

West Georgia Technical College
Julian Schmoke Jr., the new enforcement chief, was a dean at DeVry U., which paid $100 million to settle a federal lawsuit.

Several Democratic senators sent a letter to Education Secretary Betsy DeVos in early August stressing the need for a "tough" enforcement chief at the Education Department. The position had been vacant for several months, and the lawmakers said it was important to appoint someone who would crack down on institutions that "fleece taxpayers and break the law."

The department announced on Thursday that it has chosen Julian Schmoke Jr., a former dean at DeVry University, to lead its Student-Aid Enforcement Unit. News of the appointment was reported earlier in the week by Politico.

Blowback came quickly.

Congressional Democrats roundly criticized the selection. "We need a strong, independent, and experienced higher-ed enforcement chief who is up to the task of protecting billions of dollars in taxpayer funds," said Sen. Elizabeth Warren, Democrat of Massachusetts. "Dr. Schmoke’s résumé raises serious red flags, and his experience as a former for-profit-college executive does not suggest that his priorities include protecting students, consumers or taxpayers."

Sen. Chris Murphy, Democrat of Connecticut, went further. "This is a joke, right?" he tweeted on Tuesday. "Basically akin to nominating influenza to be the Surgeon General."

Many observers noted that DeVry’s parent company recently paid more than $100 million to settle a federal lawsuit involving claims of false advertising and misleading practices.

And the move once again raises fears, both inside the department and out, that the Education Department was kowtowing to for-profit colleges.

Mr. Schmoke, who served in academic roles at DeVry, was not close to the corporate side of the business. Most recently he was executive director of campus operations at West Georgia Technical College. He did not respond a Chronicle request for comment.

The criticism follows several early decisions by the department under Ms. DeVos that have been praised by for-profit colleges.

Most concerning to some observers is Mr. Schmoke’s lack of legal expertise or experience in enforcement activities.

Clare McCann, deputy director for federal higher education policy at the think tank New America, said that while Mr. Schmoke’s academic background is a positive, the purpose of his office makes his role problematic.

"The enforcement unit was originally created to go beyond compliance," said Ms. McCann, who was a senior policy adviser at the Education Department under President Obama. Appointing as its head someone who lacks a background in law or investigating does not bode well for students, borrowers, and taxpayers, who demand that institutions that commit fraud be held to account, she said.

The Student-Aid Enforcement Unit was created in 2016, during the Obama administration to address allegations of illegal activities by institutions. "Let me be clear," said John B. King Jr., education secretary under President Obama. "Schools looking to cheat students and taxpayers will be held accountable."

The operation comprised four divisions that investigated potential misconduct and high-risk activity among colleges, borrower defense-to-repayment claims, and Clery Act compliance, and handled appeals.

Robert Kaye was appointed to lead the effort. Mr. Kaye, who had helped lead consumer-protection efforts at the Federal Trade Commission, assembled a team of lawyers for student-aid investigations. That created some dissension among department staff members who saw a possible conflict with the department’s Office of the General Counsel, former department officials said. Some worried about who would have first right of refusal in investigating allegations of fraud.

Still, the Obama administration saw the move as a necessary fix to rein in "bad actor" institutions.

The Trump administration, however, has "reshuffled" the structure of the unit, Politico reported. The chief enforcement officer used to report directly to the chief operating officer of the Federal Student Aid office but will now report to the head of the program-compliance office, Robin Minor, a career official in the department.

A shift to program compliance, even under the direction of a career official, critics argue, weakens the intended purpose of investigating fraud and is a step back from the aggressive enforcement of the Obama era.

"The approach is a recipe for disaster: it encourages fraud and abuse and is exactly the attitude that allowed the massive consumer abuses in the early 2000s and through the recession," said Robert M. Shireman in a statement. He is a senior fellow at the Century Foundation who was deputy under secretary of education in the Obama administration.

Most concerning to some observers is Mr. Schmoke's lack of legal expertise or experience in enforcement activities.
In the news release announcing its new hires, the department said the federal student-aid office had "established an integrated system of complementary oversight functions" that begins with "proactive risk management to identify and mitigate risks before they pose a threat" under A. Wayne Johnson, recently named chief operating officer of the student-aid office.

Mr. Schmoke’s role, according to the release, will be to lead a team in "identifying, investigating and adjudicating statutory and regulatory violations of federal student aid programs," but it was not immediately clear whether or not the office would retain the subpoena power in its investigatory arm that it held in the previous administration.

A senior official at the Education Department told The Chronicle that Mr. Schmoke’s responsibilities at DeVry did not include "admissions, recruitment, or corporate administrative activities."

Both Mr. Johnson and Mr. Schmoke completed their doctoral degrees at Mercer University in 2016. In fact, they were in the same cohort and had the same dissertation adviser in the educational-leadership program.

Mr. Schmoke’s dissertation, at Mercer University, focused on institutional spending and student retention at public and private colleges. "Many institutions fail to give sufficient priority to the first year of college," he wrote, "with too many institutions allocating resources in ways that appear to undermine academic and instructional activities."

"Failure to allocate resources in ways that promote retention of students beyond the first year of college can lead to higher institutional cohort default rates, which puts institutions at risk of losing access to Title IV funding," he continued. That "places a tremendous financial burden on both taxpayers and federal and state governments."

In a statement, Mr. Johnson said his office has an "obligation" to ensure compliance from programs affiliated with federal student-aid programs. "We will not allow bad actors to harm students, parents, borrowers and taxpayers," he said.

"We will enforce what is right for students at every turn of their student-aid life cycle, regardless of whether they are applying for, receiving, or repaying aid."

Adam Harris is a breaking-news reporter. Follow him on Twitter @AdamHSays or email him at adam.harris@chronicle.com.