They argue that the Education Department had requested refunds or fully refunded borrowers who made payments on their loans, had their wages garnished or tax refunds seized by Kim’s ruling on Oct. 24. The attorneys say the judge handed down her ruling before they could update her on the department’s progress.
“The new information demonstrates that the Department has already remedied the harm suffered by class members and, thus, that the Court should reconsider its monetary sanction,” attorneys for the department wrote.
Money from the fine is supposed to compensate the 16,000 people harmed by the Education Department’s actions. Attorneys for the department argue that there was no accounting of the actual losses that affected borrowers suffered as a result of the department’s action.
In September, the Education Department revealed in a court filing that former Corinthian students “were incorrectly informed at one time or another … that they had payments due on their federal student loans” after Kim put a hold on collections in May 2018.
The federal agency said it sent emails to the loan-servicing companies it pays to manage the federal student loan portfolio, directing them to postpone the payments of Corinthian students and halt collection of their debts. But the department did not send specific instructions to the companies to postpone the payments indefinitely. The agency reprimanded loan servicers and department officials.
Mark A. Brown, chief operating officer in the department’s student aid office, gave a detailed accounting of the steps the agency has taken to remedy its actions, including directing loan servicers to correct the credit reports of borrowers who were erroneously deemed delinquent on their loans.
Toby Merrill, director at the Project on Predatory Student Lending, a legal-aid group representing the Corinthian borrowers, said: “It is not impressive that the Department of Education has come into compliance with the court’s injunction 18 months after it was issued."
She added: “It is absurd to say that borrowers have been fully compensated for having money illegally taken from them, and their credit illegally damaged, simply because the department has just now corrected those wrongful actions.”
The case is centered on the Education Department’s authority to cancel federal loans under a 1995 law, known as “borrower defense to repayment,” that protects borrowers who are defrauded by their colleges. The closure of Corinthian, a chain felled by charges of fraud and predatory lending, ushered in a flood of claims at the department.
In December 2017, DeVos decided 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 sought 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.
Kim agreed that the Trump administration violated privacy laws by using Social Security Administration data to calculate loan forgiveness. 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.