US Department of Education Violates Court Order by Illegally Collecting From Defrauded Former Corinthian Students | Statement

July 30, 2019

BOSTON – On Monday, a filing confirmed that The US Department of Education has ignored the injunction in Calvillo Manriquez v DeVos, which ordered the Department to stop collecting on the loans of defrauded Corinthian College students who filed for borrower defense.  The filing shows that the Department is in fact putting Corinthian students back into repayment.

 

Below is a statement from Project on Predatory Student Lending Legal Director, Eileen Connor.

“This confirms what we already know to be true: The Department of Education refuses to follow the law and has complete lack of regard for borrowers’ legal rights.  Forcing former Corinthian students into repayment is not only illegal, it causes significant confusion and financial distress for these students, who were told years ago that they are entitled to have their loans fully cancelled.

Former students of Corinthian Colleges have been burdened for years by fraudulent student debt that never should have occurred in the first place. The Department of Education has admitted that Corinthian students were lied to and deceived by this abusive for-profit school, yet it refuses to grant them the loan cancellation to which they are entitled. The Department needs follow the law and cancel the debts of all Corinthian students.”

 

Case background: Calvillo Manriquez v. DeVos

Under the Department of Education’s watch, Corinthian Colleges, the parent company to Heald, WyoTech, and Everest campuses, took in billions of dollars in taxpayer money. Corinthian used boiler-room-style pressure tactics and racially-targeted advertising to build its business, and produced outcomes for students so terrible that it had to lie to stay in business. Corinthian filed for bankruptcy, but the students it cheated were left thousands of dollars in debt for an education they never received.

The Department acknowledged that Corinthian cheated students, and that this entitled them to cancel their federal student loans. Prior to January 2017, the Department cancelled the loans of tens of thousands of former Corinthian students. In December 2017, the Department changed course and announced that cheated students should still have to repay their loans. In deciding to award “partial relief” to these students, the Department secretly and illegally gathered information about borrowers’ earnings from the Social Security Administration and compared them to earnings of other students who attended for-profit colleges. Perversely, the Department obtained the data from SSA pursuant to an information sharing agreement entered into for the purpose of protecting the public from predatory institutions like Corinthian by publishing “gainful employment” metrics.

In a groundbreaking May 26 decision, Judge Sallie Kim (N.D. Cal.) granted a preliminary injunction stopping the Department of Education from applying this illegal “average earnings rule” and ordered the Department to stop collecting on the plaintiffs’ loans. In response to that ruling, the Department refused to stop collecting from the thousands of borrowers hurt by its illegal actions and whose applications for relief it had adjudicated under its illegal rule, and only stopped collecting on the loans of the four named plaintiffs who represent the class in the case.

The Department appealed the injunction to the Ninth Circuit Court of Appeals. Oral argument was heard on February 8, 2019. A decision on the appeal has not yet been issued.

For more information about the case and the  preliminary injunction, click here.

 

About the Project on Predatory Student Lending

Established in 2012, the Project on Predatory Student Lending represents former students of predatory for-profit colleges. Its mission is to litigate to make it legally and financially impossible for federally-funded predatory schools to cheat students.

The Project has brought a wide variety of cases on behalf of former students of for-profit colleges. It has sued the federal Department of Education for its failures to meet its legal obligation to police this industry and stop the perpetration and collection of fraudulent student loan debt.

 

 

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