Education Secretary Betsy DeVos has been held in contempt of court for violating an order to stop collecting loan payments from former Corinthian Colleges students.
The Washington Post reports that Magistrate Judge Sallie Kim also fined the Education Department $100,000 for violating a preliminary injunction. Money from the fine will be used to compensate the 16,000 people harmed by the federal agency’s actions. Some former students of the defunct for-profit college had their paychecks garnished. Others had their tax refunds seized by the federal government.
“There is no question that the defendants violated the preliminary injunction," Kim ruled. "There is also no question that defendants’ violations harmed individual borrowers. Defendants have not provided evidence that they were unable to comply with the preliminary injunction, and the evidence shows only minimal efforts to comply.”
The judge has ordered the department to provide monthly status reports on its efforts to follow her order and rectify the harm it inflicted upon borrowers. Failure to comply with this latest order could result in additional sanctions.
The Education Department said it was disappointed in the court’s ruling.
In September, the federal agency 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.
Although the agency has since stopped pursuing nearly 15,000 of those borrowers, it 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 Education Department has 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 agency did not send specific instructions to the companies to postpone the payments indefinitely.
“We know we must do better,” Brown said. “… We’re all accountable for the quality of our work and the impact of our actions.”
He said the department has refunded 99 percent of affected customers and expects the remaining will be made whole by the end of the week.
Toby Merrill, director at the Project on Predatory Student Lending, a legal-aid group representing the students, said the “rare and powerful action to hold the Secretary of Education in contempt of court shows the extreme harm” of DeVos’s actions.
“Thousands of students illegally had their tax refunds seized and wages garnished, and the Department still can’t identify all of the affected students nor refunded the money,” Merrill said. “The judge is sending a loud and clear message: Students have rights under the law and DeVos’ illegal and reckless violation of their rights will not be tolerated.”
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.