A judge for the US District Court of the Northern District of California found on Thursday that Education Secretary Betsy DeVos and the Department of Education had violated a court order to stop collection on loans owed by students who had attended now-defunct, for-profit schools operated and owned by Corinthian Colleges, Inc. The court ordered Secretary DeVos and the Department of Education to pay sanctions in the amount of $100,000.
Before 2017, the Department of Education provided full relief of debt to those who had attended certain Corinthian programs, as Corinthian had made false and misleading claims about job placement rates between 2010 and 2014. The Department of Education provided a list on its website of the relevant programs for which those students could file for federal loan relief. Starting in January 2017, the Department of Education began granting partial to full relief for the borrowers based upon average earnings. The Department of Education used information from the Social Security Administration in order to determine which borrowers would be relieved from their loans and to determine how much relief they would obtain.
In May 2018 the US District Court of the Northern District of California ordered the Department of Education to cease any action to collect loans from those who fell into the groups that were identified prior to 2017. However, after this date, the Department of Education mistakenly sent 16,034 notices that payments were due to Corinthian borrowers. In response, 3,298 of these borrowers made payments.
The court stated:
Here, there is no question that Defendants violated the preliminary injunction. There is also no question that Defendants’ violations harmed individual borrowers who were forced to repay loans either through voluntary actions or involuntary methods (offset from tax refunds and wage garnishment) and who suffered from the adverse credit reporting. Defendants have not provided evidence that they were unable to comply with the preliminary injunction, and the evidence shows only minimal efforts to comply with the preliminary injunction. The Court therefore finds Defendants in civil contempt.
The court stated that it will now provide DeVos and the Department of Education an opportunity to correct these mistakes and to compensate the affected individuals.