Education secretary fined over collection of studentloan debt
A federal magistrate in San Francisco has held U.S. Education Secretary Betsy DeVos in contempt of court and fined her $100,000 for violating a court order by continuing to collect debts from more than 16,000 former students of Corinthian Colleges, a forprofit chain that folded in 2014.
Corinthian went bankrupt and closed its schools after federal investigators accused it of defrauding its students and lying about graduates’ jobplacement rates. President Barack Obama’s administration told students they could seek cancellation of their loan debts, which were underwritten by the federal government, but many of their requests were still pending when President Trump took office in 2017.
DeVos, Trump’s appointee, then required students to repay the loans if their incomes exceeded certain modest levels.
U.S. Magistrate Sallie Kim rejected the rollback and issued an injunction in June 2018 ordering DeVos to resume the debt cancellations. The Department of Education has appealed the injunction, but remains bound by it.
On Thursday, Kim said DeVos’ department had admitted that it had wrongly sent repayment notices to more than 16,000 former Corinthian students; had collected funds from 1,808 students by garnisheeing their wages or taking part of their tax refunds, and had notified credit agencies of 847 students that they owed the nonexistent debts.
“The evidence shows only minimal efforts to comply with the preliminary injunction,” Kim said. She said at least some of the $100,000 fine should be used to “remedy the harm,” and also said she would consider appointing a monitor to oversee the department’s compliance if violations continued.
In response, the Department of Education largely blamed the private loan servicers that bill students for federal debts.
“Loan servicers mistakenly billed approximately 16,000 students and parents,” Mark Brown, the department’s chief officer for student aid, said in a video statement. “We take full responsibility for that . ... We did not meet our own standards.”
Brown said the department has now refunded 99% of the funds it wrongly collected, has reprimanded the loan servicers and has taken unspecified “personnel actions” against some department employees.
Toby Merrill of the Project on Predatory Student Lending, a Harvard Law School affiliate that took part in the suit, said DeVos “has repeatedly and brazenly violated the law to collect forprofit college students’ debts and deny their rights, and today she has been held accountable.”
“Thousands of students illegally had their tax refunds seized and wages garnisheed, and the department still can’t identify all of the affected students nor refunded the money,” Merrill said in a statement.
Corinthian had 81,000 students in nationwide chains of schools that included Heald College, which had its main campus in San Francisco, with other campuses in Concord, Hayward and Milpitas; WyoTech, with a campus in Fremont, and Everest College.
Last year, the state reached a settlement that canceled remaining debts of California students who had taken out private loans to attend Corinthian schools. Most of the student loans, however, were federally funded.