DeVos Picks For-Profit Loan Company CEO To Run Student Loan Office

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DeVos pointed out her pick has “30 years of experience in the financial services industry and holds a Ph.D. in higher education.” But some are not convinced.

 

 

Education Secretary Betsy DeVos announced her plan to appoint Arthur Wayne Johnson, the CEO of Reunion Student Loan Finance Corporation, a private student loan company, to run the Office of Federal Student Aid, which manages $1.2 trillion worth of student debts.

The office, which provides more than $150 billion a year in federal grants, work-study fund and loans to college students, have sparked controversy amidst consumer complaints and rising loan defaults. Experts have also questioned its effectiveness because of its management of third-parties charged with collection of due accounts and handling of loan payments.

The education secretary pointed out Johnson's credentials as “a highly regarded leader with more than 30 years of experience in the financial services industry and holds a Ph.D. in higher education leadership.”

In the announcement, DeVos praised a Ph.D. dissertation that Johnson finished just last year through an online program at Mercer University in Atlanta. However, no mention was made of Johnson’s role as founder and chief executive of South Dakota-based Reunion Student Loan Finance Corporation, a company that originates student loans and refinances and consolidates existing loans.

Johnson said in April in order to successfully transition to a career in academia, he had to invest time to obtain a doctoral degree in educational leadership. The work is mostly completed online with each semester consisting of Friday night and Saturday seminars.

His dissertation titled, “Eyes Wide Shut: Understanding Private Student Loan Indebtedness,” researched whether students have sufficient “decision-making competence” to commit themselves to debt, especially through private loans with less preferred repayment options.

He stated loan officers at college fail to properly inform students about the “characteristics of their student loans,” which have resulted in harms “particularly in terms of impeding future plans.”

However, many people are not convinced Johnson is the right man for the job.

Apart from the potential conflict of interests, Ben Miller, senior director for postsecondary education at Center for American Progress, a public policy research and advocacy group, has raised concerns about Johnson’s eligibility criteria.

“DeVos just appointed someone to run what is essentially one of the five largest banks in the country and the only thing we know about his views on the subject is [his] dissertation,” said Miller. “Going from possibly running a school system with 44,000 students to an office that serves 43 million borrowers is a heck of a jump. Kind of like interviewing for a minor league job and then getting asked to coach the Golden State Warriors.”

Sen. Patty Murray (D-WA) also stated she has misgivings “about a private student loan CEO in such a critical position and will be examining his background closely and following up with questions about potential conflicts of interest and ethical issues.”

 

 

If appointed, Johnson will replace James Runcie, who last month resigned over a disagreement with DeVos. Runcie refuse to testify before the House Oversight Committee about allegations of increasing levels of improper payment by his former office and instead only opted to say, “I cannot in good conscience continue to be accountable as chief operating officer given the risk associated with the current environment at the department.”

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