A judge held Secretary of Education Betsy DeVos in civil contempt this week for defying a court order that banned her agency from collecting loan payments from students who were defrauded by a now-folded college. The U.S. Education Department was also ordered to pay $100,000 in damages.
There is "no question that Defendants' violations harmed individual borrowers who were forced to repay loans either through voluntary actions or involuntary methods," Magistrate Judge Sallie Kim of the Federal District Court in San Francisco said in her ruling.
The order stems from a 2017 lawsuit filed against DeVos, who upon taking office altered a debt forgiveness program that was instituted under the Obama administration for students who attended the for-profit Corinthian Colleges, which were deemed fraudulent and collapsed in 2014. The Project on Predatory Student Lending filed a class-action lawsuit on behalf of thousands of students demanding that the Education Department forgive the loans as promised.
In May 2018, Kim ordered the Education Department to stop all loan collection efforts for affected students. Last month, however, it was revealed that the agency had sent payment notices to over 16,000 borrowers and received 3,298 payments. The department also collected payments from 1,808 Corinthian borrowers through wage garnishments and the seizure of tax refunds.
"Secretary DeVos has repeatedly and brazenly violated the law to collect for-profit college students' debts and deny their rights, and today she has been held accountable," Toby Merrill, Project on Predatory Student Lending's director, said in a statement Thursday.
The Department of Education responded to the ruling on Twitter, saying it was "disappointed" by the court's order but ceded that the agency made "unacceptable mistakes."
"Although these actions were not done with ill-intent, students and parents were affected and we take full responsibility for that," said Mark Brown, the department's chief operating officer of Federal Student Aid. Brown added that the department is working to refund all of the payments collected and institute structural changes within its collections processes. "We know we must do better," he said.
<i>Attorney General Kamala Harris displaying an internal document showing the target demographic of Corinthian Colleges during a news conference in 2013. Photo Credit: Eric Risberg/AP/Shutterstock</i>
Corinthian Colleges, which enrolled 85,000 students at two California campuses, first came under scrutiny in 2012 for false advertising, deceptive marketing that targeted vulnerable communities, and falsifying job placement rates. Under then-California Attorney General Kamala Harris, the state sued Corinthian in 2013. The Education Department later instituted an expedited loan forgiveness process.
"Where students have been harmed by fraudulent practices, I am fully committed to making sure students receive every penny of relief they are entitled to under law," then-Secretary of Education Arne Duncan said in a statement in 2015.
In 2017, however, the department under Secretary DeVos began denying loan forgiveness applications. Then in March 2018, the agency started notifying students that forgiveness plans would be tied to individual incomes and began demanding and collecting payments.
Within months, the San Francisco court ordered the agency to cease its collection efforts. Judge Kim on Thursday determined that the Education Department took only "minimal efforts" to comply with the court's injunction.
"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," Merrill added in his statement.
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