“Secretary DeVos continues to show that she thinks she and the Department of Education are above the law,” said Toby Merrill, director at the Project on Predatory Student Lending, a legal-aid group representing the students. “Let’s be clear about the facts: The department admitted that it blatantly violated a court order that we won.”
In a September court filing, the Education Department revealed that more than 16,000 former Corinthian students “were incorrectly informed at one time or another … that they had payments due on their federal student loans” after a federal judge put a hold on collections in May 2018.
The federal agency said it has since stopped pursuing nearly 15,000 of those borrowers but is still working to resolve the problem with the remaining borrowers. About 1,808 people lost wages or tax refunds as a result of the department’s actions. The agency is working with the Treasury Department to refund those borrowers, as well as others who made payments on their loans.
The Education Department did not immediately respond to requests for comment. Justice Department attorneys representing DeVos and the Education Department argued in a court filing this week that sanctions are unwarranted because there was a “good faith” effort to comply with the order.
The case stems from DeVos’s decision in December 2017 to provide debt relief to former Corinthian students by comparing the average earnings of students in similar vocational programs. That earnings information was collected under the gainful-employment regulation, which penalizes career-training programs for producing too many graduates with more debt than they can repay.
The Project on Predatory Student Lending at Harvard University and the Housing and Economic Rights Advocates group filed an injunction in March 2018 to stop the practice. They argue that the Education Department has no right to use the data, which is supplied by the Social Security Administration, for any purpose other than to evaluate vocational programs. The attorneys also say denying full relief to Corinthian students is illegal.
Magistrate Judge Sallie Kim of the U.S. District Court in San Francisco agreed that the Trump administration violated privacy laws by using Social Security Administration data to calculate loan forgiveness but refrained from declaring the partial relief plan illegal. She banned the Education Department from using the earnings data to grant partial student debt relief to Corinthian students and halted collection on their loans.
She said the order will remain in place until the court can determine the proper course of action but noted that her ruling does not preclude DeVos from granting full relief to Corinthian students in the meantime.
A 1995 law known as “borrower defense to repayment” gives the Education Department authority to cancel the federal debt of students whose colleges misled them about graduation or job placement rates to get them to enroll. The closure of Corinthian, a chain felled by charges of fraud and predatory lending, ushered in a flood of claims at the Education Department.
The Obama administration was slow to respond to the applications but started to make progress before leaving office. That momentum ended with President Trump’s election, with his administration refusing to take action until education officials could fully review procedures instituted under President Barack Obama.
DeVos started processing claims in December 2017, announcing the approval of 12,900 applications and denial of 8,600 claims from former Corinthian students. She said applicants would receive full loan forgiveness if their earnings are less than 50 percent of those of their peers. If their pay is at or above that threshold, the department would provide relief on a sliding scale.
Since the courts put a stop to that, the Education Department has not processed debt relief claims and has allowed the backlog to grow. As of June, there were more than 210,000 applications for debt relief sitting at the Education Department, according to the agency.