This month, the department revealed in a court filing that it identified another 29,000 people who were pursued for loan payments. The agency also informed attorneys for the students that it never fully ceased collections and pursued at least 21 people for payments as recently as this month.
“The malfeasance of Secretary DeVos continues to shock us,” said Eileen Connor, legal director at the Project on Predatory Student Lending, a legal aid group representing the students. “Students have had their tax refunds stolen, their wages seized, been evicted from their homes, and seen their lives ruined, many losing things that cannot be recovered, due to the Department of Education’s shameful actions.”
Education Department spokeswoman Angela Morabito said the agency does not comment on allegations in pending litigation.
In a motion filed Monday, attorneys for the Corinthian students argue that the scope of people harmed by the department’s actions and its continued violation of the order warrant stiffer penalties.
Money from the $100,000 fine was meant to provide redress for some 16,000 borrowers, but now there are about 45,000 people affected. Attorneys have compiled affidavits from borrowers about how the collection has affected their lives. Some who lost wages said they were forced to borrow money from family or cover basic expenses with high-interest credit cards, had utilities cut off or faced eviction.
The Education Department has collected more than $20 million from Corinthian students represented in the class action case, according to the filing. It has yet to refund all of the money.
As a part of her ruling, Kim requested monthly status reports on the department’s efforts to rectify the harm it inflicted upon borrowers, some of whom had their wages garnished or tax refunds seized.
In the latest court report, the department said a more thorough review “revealed that an isolated miscommunication between [the Federal Student Aid office] and its [loan] servicers and other logistical issues caused this underestimate in the number of impacted borrowers.”
The Federal Student Aid office, according to the report, “has corrected the miscommunications with the loan servicers and developed systems to ensure borrowers stay in the correct repayment status.”
Of the 29,000 newly identified borrowers, 550 lost wages or tax refunds because of the collection practice, while 5,000 were hit with negative marks on their credit reports.
Morabito at the department said DeVos took “immediate action” to require the Federal Student Aid office to “continually update and monitor the number of potentially affected borrowers and to reverse all billing notices, credit reports, payments, or garnishments.”
Morabito added: “FSA has accomplished that task, and as of today, all borrowers identified in the Department’s most recent report to the court are in forbearance, or an appropriate status.”
The ongoing dispute stems from a class-action lawsuit filed in 2018 by the Project on Predatory Student Lending at Harvard University and the Housing and Economic Rights Advocates on behalf of Corinthian students. The groups alleged that DeVos had illegally limited loan forgiveness due to students under a statute known as borrower defense to repayment.
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 in May 2018.
DeVos has cited the ruling as the reason the department refused to process nearly 300,000 claims filed by borrowers — most of whom attended for-profit colleges. The department began clearing out the backlog this month after updating its methodology with a sliding scale based on a borrower’s wages to determine loan forgiveness. The formula has been panned by some economists, who say it’s flawed and may land the Trump administration back in court.