Jon Oberg is the world’s expert on corruption in the student loan program
Today, he is Mobology’s first guest columnist: "On Eliminating the U.S. Department of Education"
Dr. Jon H. Oberg has lived and worked in three capital cities. A Nebraska resident, he divides his time among Washington, D.C. (in the Maryland suburbs), Lincoln (on a prairie), and Berlin (Kreuzberg). His popular blog, Three Capitals, exhibits his extraordinary and unique perspectives, especially on U.S. politics and about those issues related to higher education and the electorate in rural America.
Jon is best known for his heroic investigation of corruption in the student loan program. The New York Times detailed his work in a front-page, above the fold article, “Whistle-Blower on Student Aid Is Vindicated.”
Mr. Oberg, now retired, has a master’s degree from the University of Nebraska and a doctorate in political science from the Free University of Berlin. He is a former Navy officer, university professor, and aide to Senator J. James Exon, a Nebraska Democrat, from 1979 to 1984. He was an Education Department liaison to Congress under the Clinton administration. . . .
Today, with Mr. Oberg’s predictions proven accurate, he has become a bit of a celebrity. [Senator Ted] Kennedy arranged his testimony before the Senate in February.
“Taxpayers owe a tip of the hat to former Nebraskan Jon Oberg, who blew the whistle on the scheme that allowed companies to grab hundreds of millions in subsidies,” the Lincoln Journal Star wrote in October.
The Times Editorial Board also lauded Jon’s work, “Congress and the Student Loan Scam.”
Yesterday, The Times published a front-page article by Sam Dillon that offered chapter and verse on how the Department of Education, which is supposed to oversee the lenders, was virtually taken over by the companies it was supposed to regulate. The story focused on Jon Oberg, a department researcher, who notified the government . . . that the lenders were improperly collecting hundreds of millions of dollars a year in subsidy money.
Mr. Oberg told the department that it could just shut off the subsidies by simply sending the lenders a letter. But his bosses feigned ignorance and twiddled their thumbs for three more years while the lenders grew fat off billions that should have been going directly to needy students.
Jon is featured in my 2020 book—Money, Politics, and Corruption in U.S. Higher Education: The Story of Whistleblowers—along with four other people of courage, integrity, and principle: David Halperin, Rod Lipscomb, and Dr. James Keen, as well as legendary whistleblower attorney-advocate, Louis Clark of the Government Accountability Project, who wrote the Introduction to our book.
Jon assists authors, researchers, and students and welcomes requests sent to joberg@aol.com, especially on matters of public policy.
—Dan E. Moldea
Jon Oberg: On Eliminating the U.S. Department of Education
Washington — The incoming Trump administration's attempt to eliminate the Department of Education will not be the first such try. The department was barely created over four decades ago before there were calls for its demise.
It survives because several of its programs, especially those for children with disabilities and disadvantages, are widely supported. Some of its higher education programs are likewise valued in many quarters, beyond party or ideological politics. So the evergreen question of department elimination has often become a cosmetic matter of moving labels and boxes around among agencies and bureaus, and the efforts collapse.
Before this exercise is played out again, we should ask whether parts of the department should actually be eliminated, rather than shuffled around. The answer is yes and let me offer possibilities.
Let's start by eliminating programs that put private profit incentives into higher education, which have been costly failures.
For three decades, the department's federal guaranteed student loan program was administered through state, federal, and nonprofit agencies until the mid-1990s, when the nonprofit regional secondary market Nellie Mae persuaded Congress to allow it to convert to for-profit. A wave of other secondary market conversions followed. Congress also allowed Sallie Mae, previously a government sponsored enterprise, to become fully private. Henceforth, stockholder interests dominated corporate decisions and for the next two and a half decades companies went on a rampage of industry consolidations, all the while abetting increased borrowing, creating kickbacks, making false subsidy claims, and driving legions of borrowers into financial ruin with bad loan servicing. The nation's student loan system is in crisis. Now is the time, as a public policy matter, to end the department's student loan program in favor of one like Australia's, whose student loans are handled through its tax system.
Department expenditures on for-profit colleges represent another failed effort to put private profit incentives into higher education. Billions are wasted annually on shoddy for-profit schools, which should be required to put up bonds fully commensurate with their risks or, as a part of devolving authority to states, be covered by state indemnification of federal taxpayers for the for-profit schools they permit to operate.
Yet another failed attempt to put private-gain incentives into the department is the office of Federal Student Aid (FSA). It was created as a "performance-based organization" in 1998 to emulate private business models of personnel administration. Most recently, it has failed spectacularly and tragically in its administration of the student financial aid application process known as FAFSA, itself a flawed and exploited system that, even when operating properly, can be misused to the detriment of the department's mission. Recommendation: end FSA and rethink FAFSA (and FAFSA spending) in the process.
In addition to eliminating parts of the department that rest on incentivizing private gain, other parts could be re-balanced for greater efficiency and effectiveness. The Higher Education Act is founded and premised on "cooperative federalism" and envisions a strong role for states and institutions. Those roles should be enhanced by requiring more state and institutional "skin in the game" as a condition of federal program participation. Re-directing institutional financial aid toward the financially needy as a part of this process could save significant sums and might even be welcomed by schools caught up in unsustainable arms races to fund aid for the non-needy.
Conclusion: Eliminating parts of the Department of Education is not a bad idea. What should not be done is to double down on where it has demonstrably failed, but to cut out parts that drag the department down and hold it back. And please don't think that moving boxes around will fool anyone. This is a time to make much needed changes.
Jon H. Oberg
