Elizabeth Warren Took On Obama Over Student Debt Forgiveness. How She Won Is Central To Her 2020 Campaign

“Her theory of change is that you focus on one or two levers, and you push them hard.”

In 2015, when she found herself on Air Force One with then-president Barack Obama, Sen. Elizabeth Warren seized the chance to pressure the most powerful man in the world about an obscure part of federal tax law.

Warren — along with activists, consumer lawyers, and a group of other Democratic senators — was in the midst of what would become a years-long fight to get loan forgiveness for tens of thousands of students who had been defrauded by Corinthian Colleges, a collapsed for-profit college chain.

Earlier, Warren and others had helped convince the Education Department to agree to cancel the loans for some of those for-profit college students, opening the door to forgiveness for hundreds of thousands of people. Now, Warren was waging a new battle against Obama’s Treasury Department, which was planning to hit students with steep tax bills on their forgiven loans.

The Treasury was refusing to budge. The agency said it had no choice: The law was the law, and if Warren wanted to stop the students from having to pay taxes, she’d have to convince Congress. Warren had other ideas.

Warren’s policy team had come up with a detailed letter that explained why students should not have to pay taxes on their debts, and how, exactly, the Treasury Department could carry that out. On Air Force One, she went through those points with Obama.

Warren’s goal, according to people familiar with the conversation, was not just to convince Obama that it was possible to do something that his own administration was telling him was impossible. It was to persuade him to spend some of his political capital — which was in short supply as he battled against a Republican Congress — on a group of struggling low-income students who had been defrauded by a now-defunct for-profit college chain.

Implicit in that conversation was a threat: If he didn’t act, Obama could have a public image problem on his hands in the form of a loud, popular senator who had already been raising hell about his Education Department.

Not long after the Air Force One flight, the Treasury Department told Warren it had found a way to stop the students from being hit with tax bills after all.

It was a key victory in Warren’s work on behalf of for-profit college students — a battle that has come to help define who Warren believes the federal government’s power should be used to help, and, more importantly, how best to instigate that change.

BuzzFeed News spoke to activists, consumer lawyers, congressional staffers, and former Obama administration officials about Warren’s work to secure loan forgiveness for Corinthian students, which began in 2014. Warren, they agree, played a pivotal role in the battle.

“Progress in America doesn’t happen without a grassroots army.”

She did it by turning to what had become the core tool of her political life: a potent combination of grassroots activism, intense political pressure, and detailed analysis of consumer law. And she used that tool in part against her own party’s administration, strengthening a political identity that cut against what was then the mainstream of American liberalism.

Warren took a lasting lesson from the fight, she told BuzzFeed News in a recent interview, one that is now central to her presidential campaign: “Progress in America doesn’t happen without a grassroots army.”

But for someone who often presents herself as a political outsider, Warren also worked extensively within the boundaries of power to help get Corinthian students loan forgiveness — an approach that draws a contrast with Sen. Bernie Sanders, who has put far greater focus on large-scale outside pressure than on internal movements and incremental details.

One former Education Department official called it an “inside/outside strategy”: Warren would hammer the administration publicly at the same time she worked behind the scenes with those government officials, acting, many felt, as an ally.

In the end, the drawn-out political battle resulted in something that was entirely unprecedented: the loans of at least 30,000 students who were defrauded by Corinthian and other for-profit schools were wiped out entirely, at a cost to taxpayers that is in the hundreds of millions of dollars.

“It’s really easy and popular today to take punches at Betsy DeVos,” said Eileen Connor, an attorney at Harvard University's Project on Predatory Lending who works on behalf of for-profit college students, of President Donald Trump’s education secretary. “But Sen. Warren was in the fight even when the administration was run by Democrats.”

The battle over Corinthian is emblematic of Warren’s unique approach to power: an intense focus on microscopic details alongside an at times bullheaded push for the government to act as an agent of what her campaign now calls “big structural change.” And it is a road map of what Warren’s presidency could look like — particularly if she finds herself pitted against a Republican Senate.

That is especially true when it comes to one of the central promises of her campaign, one with direct roots in the Corinthian fight: to forgive the student loans of tens of millions Americans.

The conventional wisdom in 2014 was that the tens of thousands of students who had been defrauded by Corinthian Colleges were, in a word, screwed.

Among for-profit colleges, many of which had been plagued by allegations of fraud, Corinthian was seen as the worst of the worst. Its biggest school, Everest College, had a long documented history of using false promises and misleading statistics to lure students into taking out loans they could not repay in order to get jobs that many never saw. The company was sued over its misleading claims by Kamala Harris in 2013, when she was California’s attorney general, and by the Massachusetts attorney general and the Consumer Financial Protection Bureau a year later.

For years, Corinthian had enriched its shareholders and executives. But government lawsuits and the threat of regulatory oversight from the Obama administration had battered its business, leaving it close to financial collapse.

The chain’s students had been targeted by the company for their poverty, isolation, and vulnerability and were tricked into taking out large federal student loans with misleading statistics and false promises. With Corinthian headed toward bankruptcy, though, they were unlikely to get any settlement from the company. Still struggling economically, many without ever completing their degrees or getting the jobs they'd been promised, they would be stuck in a mire of debt that they would not be able to repay.

Warren, who joined the Senate in 2013 after spending much of her career studying the rights of consumers in bankruptcy, was among the first prominent politicians to consider a different possibility, one pushed by activists and former students: that the loans of students that were part of the largest for-profit college collapse in history should be forgiven altogether, their debts wiped off the map.

To the Massachusetts senator, there was no question about what should be done.

“They got people to sign up for student loans by scamming them. If an insurance salesman or a car dealer did that, the buyer wouldn't have to pay. And the law was just as clear here,” she told BuzzFeed News. “When a school breaks the law like this, students are entitled to cancel their student loans. Someone needed to come in and fight for them on this.”

In a massive higher education system that Warren saw was broadly “broken,” for-profit colleges were exemplifiers of the worst types of fraud and lack of oversight on the federal government’s behalf. Warren saw Corinthian as a chance to work against the whole system, and to do it on behalf of the students the system had left in the dust.

“Her theory of change is that you focus on one or two levers, and you push them hard.” 

“Her theory of change is that you focus on one or two levers, and you push them hard,” said one former government official who worked with Warren on higher education. “She intuitively was like, 'That's the lever.'”

The struggles of Corinthian students, Warren thought, could highlight the burdens that student debt puts on borrowers — and the government’s own culpability in lending money indiscriminately to pay for troubled for-profit schools.

Warren was personally invested in the details and legal mechanics of getting Corinthian students forgiveness, said the former official — taking principles from consumer law like “unfair and deceptive acts and practices,” or UDAP, and applying them to higher education.

At the direction of activists and consumer attorneys, with whom they spoke frequently, Warren and her staff were able to identify a mechanism within existing law to get Corinthian students’ loans forgiven: an obscure piece of the Higher Education Act called the “defense to repayment” provision, which said that borrowers could petition for their loans to be discharged if their schools had broken the law.

The few people who had heard of “borrower defense,” as it would come to be called, assumed it was narrow and burdensome — far too difficult for Corinthian students to actually use. It had been by just five students in the space of a decade. But in a letter, Warren and other Democratic senators got the Education Department to admit in August 2014 that the clause could be applied much more broadly.

That admission “was the key,” said Julie Margetta Morgan, a former policy adviser to Warren who had spearheaded the office’s early work on for-profit colleges. It gave them a “lightbulb point”: They could use state and federal lawsuits already underway against Corinthian to prove its students’ defense to repayment claims, rather than requiring each student to prove their case individually. That could mean broad, blanket forgiveness for tens of thousands of students at a time.

The senator and her team pounced, sending another letter, signed by 12 other Democrats, that demanded the government use the provision to forgive Corinthian students’ loans. But that alone, they knew, wouldn’t be enough to force the reticent Obama administration into granting loan forgiveness. In the letter, the lawmakers laid out a careful road map for the government to follow.

Warren wanted to use her influence to steer the government into following that path and creating a process for defrauded students to apply for loan cancellation that would eventually allow Corinthian students’ loans to be forgiven en masse.

At first, apart from Warren and a few other lawmakers, like Rep. Maxine Waters and Sen. Dick Durbin, there was little attention from Washington on fates of the low-income and marginalized students who had been preyed on by Corinthian.

But early in 2015, a group of activists with ties to Occupy Wall Street began organizing former Corinthian students. Some students went on a “debt strike,” vowing not to repay their loans. The Education Department had no process for filing a borrower defense claim, and was not answering questions about what the process entailed, so the activists created their own application, collecting hundreds of claims online from former students and delivering them, in a hefty paper stack, to the department.

Student loan experts dismissed the debt strikers as wildly unrealistic. But as the pile of borrower defense claims from activists mounted, so did evidence, in court cases, of abuse and fraud by Corinthian. Corinthian officially filed for bankruptcy in May 2015, and photos of desperate students waiting outside padlocked campuses spread on the news. In June, the Education Department, under pressure from Warren and other Democratic lawmakers, made an announcement.

Then-education secretary Arne Duncan said the department would forgive tens of thousands of Corinthian students’ loans and work to create a pathway for other students to apply for forgiveness as well. There were scores of other for-profit schools that had been accused of fraud or were teetering on the edge of collapse, and their students, too, would be able to use the defense to repayment process to apply for loan cancellation.

Warren does not think she and other Democrats would have succeeded in pushing the Obama administration without activists at their sides.

“It was a lot of work, digging into the details. We sent letters. There were investigations. We called events with officials who had seen for-profit colleges like Corinthian collapse in their state. And, you know, it still wasn’t enough to get the job done,” Warren reflected in the interview. “You have to figure out what’s broken, have a serious plan to fix it, and then build a coalition to make it happen.

“It was the hard work and persistence of organizers, activists, and organizations fighting for student debt relief that helped us turn up the pressure.”

"You have to figure out what’s broken, have a serious plan to fix it, and then build a coalition to make it happen."

The activists, in turn, credit Warren. She was “clearly the most important senator in fighting for for-profit college students,” said Luke Herrine, who worked with the activist group Debt Collective to organize former students of for-profit colleges and put pressure on the Education Department.

While the debt strikers and activists hammered the Education Department from the outside, Warren worked a different route, Herrine believes. “She played a substantial role in moving people within the Department of Education,” he said.

Former Education Department officials agreed with Herrine’s assessment.

“She was both calling for tough enforcement and then praising and having the back of the administration when we took those tough enforcement actions,” said one former department official. “It was a smart way for her to leverage her role, not being in the majority but having the platform. She knew how to get things done.”

Once the Education Department had agreed that it would create a way for defrauded students to file claims, though, the progress was still messy and, to Warren, achingly slow — in part because it was burdened by bureaucracy, and in part because of intense opposition from Republicans upset with the burden of more regulation and the cost to taxpayers.

The first victory over defense to repayment, Warren told BuzzFeed News, “started a years-long campaign to get the [Education] Department to enforce that law.”

Warren became a thorn in the side of the Obama administration — a constant, needling presence both publicly and privately, criticizing the department in the press and on the Senate floor even as she and her staff met regularly to work with department officials behind the scenes. Just days after Duncan made the announcement about Corinthian loan forgiveness, Warren was criticizing him for the government's failure to regulate Corinthian.

When the Obama administration argued, particularly, that the government didn’t have the ability to grant forgiveness automatically to Corinthian students, Warren echoed the argument of student loan activists: there was nothing in the law to support that position. Thanks to state and federal lawsuits against Corinthian, Warren and others argued, the government already knew which students had been defrauded, and could grant their claims automatically.

In meetings with the Education Department, “Warren was laser-focused on the fact that there was no real legal barrier to providing immediate relief for Corinthian borrowers, and she kept asking for proof any time an excuse for not acting was proffered,” said Margetta Morgan, Warren’s former staffer.

Warren’s office conducted its own investigation into how many former Corinthian students were being pursued by debt collectors — a move geared at putting pressure on the department to stop collecting the loans of some 80,000 defrauded students. In November 2015, she gave a fiery speech that accused the department’s staff of “dragging their feet” on loan forgiveness: “These students don’t owe the student loans that Corinthian tricked them into signing.”

Warren’s excoriations of the department on the Senate floor sometimes caused tension within the administration, said one former official. But it also won her praise from Education Department officials who were sometimes subjected to her criticism.

“There’s a part that’s savvy of it — when you channel that outrage, it gets press attention and social media hits, and it built the pressure on institutional actors.”

“There’s a part that’s savvy of it — when you channel that outrage, it gets press attention and social media hits, and it built the pressure on institutional actors,” said another former department official. “It’s not that she’s excited to have more social media followers, to be on the TV more. It’s that she sees the building of public will as a way to bend the system towards the interest of working folks who haven’t gotten the kind of protection from the government before.”

In 2016, Warren and Waters showed up at an Education Department rulemaking committee meeting to press their case. It wasn’t a normal visit for members of Congress — there were few cameras or reporters. But Warren and Waters had been invested in the process for nearly two years.

"Corinthian wasn't the first predatory college that got caught swindling students, and frankly it won't be the last," Warren told the committee. "But you have the opportunity this week to make the path to debt relief much clearer for students who have been cheated.”

An often overlooked detail of the Corinthian fight, attorney Eileen Connor said, was how Warren personally involved herself with individual students. Warren hosted a clinic in Massachusetts alongside the state attorney general, Maura Healey, to help students file borrower discharge paperwork. After Warren’s office worked with Connor to collect and document the stories of defrauded borrowers, Warren’s staffers sent signed copies of the report they produced to each of the students they had spoken with.

“That speaks volumes,” Connor said.

The confirmation of John King as Obama’s new education secretary was supposed to be straightforward. King, who came out of New York’s school system, was an uncontroversial pick who would serve less than a year before a new president took office.

But Warren “almost tanked” the nomination, according to two people who were involved.

Warren wanted a litany of fixes in higher education from King, but her first priority was the former Corinthian students. She wanted the department to dramatically increase the pace of loan forgiveness, and to fix the system so that other defrauded students would not have to wait.

She grilled King at his confirmation hearing, pointing out that just a tiny fraction of defrauded students had actually seen their debts forgiven.

“It seems to me, Dr. King, that the department is moving painfully slowly while students who got cheated are struggling under debts that they were conned into taking on,” Warren said.

She asked, “How do you plan to live up to the department’s promises and actually ensure that each and every student who was defrauded receives debt relief now?”

She threatened publicly that she would not vote for him on the Senate floor unless she got a series of “direct answers” — which he eventually gave. Mostly, two people involved in the process said, Warren wanted the Education Department to feel the pressure — and to know she would be watching.

King was determined, one former Education Department official said, to speed up the process of loan forgiveness for defrauded students, and to create a lasting way to cancel the loans of other for-profit college students.

When King was confirmed, just 1,300 Corinthian students had seen their loan debts canceled. By the end of the Obama administration, King had forgiven the loans of some 30,000 students — almost 15,000 of which were in the final two weeks of the administration, with the looming threat of Trump.

King called Warren a “fantastic partner in the effort to try to ramp up accountability” in higher education. “I have a tremendous amount of respect for her,” he told BuzzFeed News.

In January 2017, just before the Education Department changed hands, it released a universal application for student loan forgiveness.

Warren worked on other “levers” too. She focused on how student loans were serviced and how colleges were accredited — two places where weak government oversight, she thought, led to fraud, abuse, and a waste of government money.

In both cases, Warren did what she had with Corinthian: She found each system’s worst actor and hammered it, pressuring the government to do something to oversee it and, by extension, to repair the system as a whole. And she worked simultaneously with government and agency officials to try to find a solution.

In 2016, she fired at the accrediting agency that had given its stamp of approval to Corinthian’s troubled schools, a group known as ACICS — the peak example, she said, of a broken system that allowed government money to flow to for-profit schools without oversight. King eventually moved to shut the accreditor down.

Later, under the Trump administration, Warren set her sights on the student loan servicer Navient, an offshoot of Sallie Mae that had a long history of violations and complaints. While Warren hammered the company publicly, including accusing its CEO of making false statements, the Consumer Financial Protection Bureau, the consumer watchdog agency Warren created years earlier, sued Navient, alleging it had misled borrowers and bungled student loan payments.

The arrival of Donald Trump and Betsy DeVos ground to a halt the work that Warren and many others had put into getting debt relief for for-profit college students.

The Education Department stopped processing borrower defense claims altogether, leaving some 100,000 mostly for-profit college students waiting in limbo. “All one had to do was raise his or her hands to be entitled to so-called free money,” DeVos said of the process Warren pushed the Obama administration into creating.

But DeVos has also repeatedly been stymied by courts in her efforts to stop forgiving for-profit college students’ loans under the precedent set by the Obama administration. DeVos was forced by a judge to cancel an additional $150 million in debt, and is facing a litany other lawsuits from students and states.

Warren spent the first year of the Trump administration focused intensely on DeVos; she started a monitoring effort she called “DeVos Watch,” meant to put even more intense pressure on Trump’s education secretary than she had on King.

But in her presidential run, Warren has zeroed in on something else: a plan to cancel the student loans, at least in part, of some 43 million Americans. Her plan would cancel up to $50,000 of debt for people whose household incomes are less than $100,000 — entirely wiping out the loans of 75% of Americans with student debt.

Before Warren announced the plan in April, almost no one in the mainstream of the Democratic Party was talking about canceling debt altogether. It’s a steep task that looks, from the outside, almost impossible — such a venture would require a deadlocked Senate to pass a law, as well as passing the tax on ultra-millionaires that Warren wants to use to pay for it.

But Warren thinks she can do it — and her first effort at student debt forgiveness with Corinthian students lays the road map.

Would she focus on passing a massive debt forgiveness bill, or would she use executive power to try to find more of the pathways and loopholes that canceled debt for for-profit college students?

“The answer is yes and yes,” Warren said. Her administration, she said, would look for ways to carve off student debt into smaller pieces, giving relief to people quickly.

“We could have a much more expansive student loan cancellation program under the current law,” Warren said.

Independent of Warren's campaign, Luke Herrine, the Debt Collective activist, is looking for ways to do that, researching how the government could discharge student debt without Congress. He is doing the work in part for Julie Margetta Morgan, the former Warren staffer who helped find the way to get Corinthian students forgiveness, and who is now a fellow at the Roosevelt Institute.

“We're going to need to pass a law to reach all 43 million Americans,” Warren said. “I need a bigger grassroots army than ever.” ●

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