U.S. Education Secretary Betsy DeVos faces potential sanctions or a finding she’s in contempt of court for continuing to collect on the debt of former students at bankrupt Corinthian Colleges Inc., going so far as seizing their tax refunds and wages.
Bloomberg reports that U.S. Magistrate Sallie Kim said she was “astounded” that the department violated her June order to stop collecting the debts from students, who had been promised refunds of their tuition.
“At best it is gross negligence, at worst it’s an intentional flouting of my order,” Kim warned lawyers for the education department during a hearing in San Francisco. “I’m not sure if this is contempt or sanctions. I’m not sending anyone to jail yet, but it’s good to know I have that ability.”
Corinthian, once among the largest for-profit college chains in the nation, faced a flood of government investigations and lawsuits alleging systemic fraud before filing for bankruptcy protection from creditors in 2015.
In the aftermath, the federal government declared that as many as 335,000 former students could erase their loans by checking a box and signing their names on a simple form, under penalty of perjury. Doing so, the former students were told, would void their debt and prompt a refund on past payments.
The Education Department “takes responsibility” for the violations of Kim’s order, Charlie Merritt, a lawyer for the agency, told Kim. “We will bring ourselves into full compliance” and make sure the agency “stays that way going forward,” he added.
In 2017, a group of former Corinthian students sued the Education Department and DeVos over claims it had ceased granting the loan discharges. The case was brought as a class action on behalf of about 80,000 students.
A report the department filed last month to show its compliance with the judge’s order to cease debt collections instead explained that the agency has seized tax refunds and wages from at least 1,808 students. Almost two years later, the department still hasn’t identified all the students in the lawsuit who are owed refunds, and has processed refunds for only 10 of them, according to a court filing.