Attorneys General, Legal Service Organizations Join Push to Demand Loan Cancellation for Cheated For-Profit College Students | Press Release

April 17, 2018

Briefs Filed This Week Highlight Direct, Long-Term Harm Suffered By Corinthian Borrowers, Severely Compounded By The Department’s Actions

BOSTON – Several Attorneys General, legal service organizations, and activists joined the call this week to stop the federal Department of Education from reneging on its promise of debt cancellation to former students of Corinthian Colleges who were cheated by the for-profit school.

The groups filed amicus curiae (friend of the court) briefs on Monday in the class action lawsuit Calvillo Manriquez v. DeVos. The briefs were filed by the Debt Collective, a group of legal aid organizations (Public Law Center, Public Counsel, National Consumer Law Center), and Attorneys General in the states of California, Illinois, Maryland, and Massachusetts. The briefs support former Corinthian Colleges students’ Motion for a Preliminary Injunction, in which they ask the court to stop the Department of Education from denying them loan cancellation to which they are legally entitled. Collectively, the briefs illustrate the harms that Corinthian caused its students and detail how the Department of Education has compounded those harms by delaying and denying full loan cancellation to the borrowers. They are a powerful rebuke to the Department’s arguments that Corinthian borrowers are not harmed by the Department’s delay, and that it is legally acceptable for the Department to deny—in whole or in part—their claims for debt relief.

The suit was initiated by former Corinthian students when the Department, after previously acknowledging that the school’s fraud necessitated total loan cancellation, abruptly changed course. Now, the Department is using a rough approximation of applicants’ earnings, compared to a benchmark earning rate, to measure the “value” Corinthian purportedly provided these defrauded borrowers. As a result of this “improved” process, the Department has cut the cost of its negligent oversight—at the expense of students—by eighty percent. The borrowers are represented by the Project on Predatory Student Lending and the Housing and Economic Rights Advocates (HERA).

“These organizations are standing up for students, and for fairness and accountability, and letting the court know how many people care deeply about the enforcement of the rule of law as it applies to defrauded student loan borrowers,” said Project Director of Litigation Eileen Connor. “As these briefs show, the Department’s actions have had devastating consequences for borrowers who are just trying to move on with their lives after being cheated by their school, and now by their government.”

The Debt Collective, a membership organization made up of debtors who collaborate to resist unjust and predatory debts, tells stories of its members who are being harmed by both the Department’s delay in fully discharging their debt and in partially denying their claims. They include:

  • Pam Hunt completed an online degree program at Everest College. While she has been waiting for the Department to discharge her debt, her basement flooded and she needed to move. However, she has been unable to qualify for a mortgage because of her debt-to-income ratio and she was denied housing through Habitat for Humanity for the same reason.
  • Erica Clark attended a paralegal program at Everest in the hopes of attending law school. She later learned that Everest was not considered a legitimate program and her dreams were dashed. She now works in a General Motors factory and needs “every cent from her paycheck to get by.”
  • Devin Ezzell was a student at Everest college in Rochester and is a single father. He has been denied employment on account of his debt, cannot obtain a good car loan, and was denied home loans because of his debt-to-income ratio.

The Debt Collectives brief states:

“The Collective has worked with hundreds of former students who attended Corinthian and other institutions that closed after investigations unveiled widespread misconduct, and has observed firsthand the harms that flow from delayed or partial debt relief . . . Plaintiffs here and members of the putative class face existential financial threats if an injunction is not granted.”

Public Law Center, Public Counsel, and the National Consumer Law Center, all non-profit legal aid and advocacy organizations that work with student loan borrowers who have been harmed by predatory schools, also shared stories from students in their brief. Their brief states:

“[We] have seen the devastating harm experienced by low-income students who were cheated by Corinthian and left with mounds of unaffordable debt. [We] thus understand how the harm will be compounded if the Department is permitted to simply abandon its promise of loan cancellation to cheated Corinthian students and to deny relief on a newly created basis.”

Four states also weighed in on behalf of the class of students, asking the court to grant the relief the students are seeking.  The Attorneys General in the states of California, Illinois, Maryland, and Massachusetts submitted a brief that describes the states’ extensive work with the Department of Education to provide relief to Corinthian borrowers, and note that 47 states have spent more than $290,000 on outreach to cheated Corinthian borrowers. The states detail the harms residents are facing as a result of the Department’s actions, citing several more examples of borrowers who have been financially crippled because of the Department’s refusal to fully cancel these loans as promised. Their brief states:

“The Amici States have a strong interest in safeguarding the economic well-being of their residents who the U.S. Department of Education has already determined are qualified for complete cancellation of their federal student loans because they were defrauded into attending certain educational programs offered by the now-defunct, predatory Corinthian Colleges . . . [We] submit this brief to assist the Court in understanding . . . the irreparably harmful consequences of the Department’s decision…”

Click here to view the briefs in their entirety.

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About HERA

Housing and Economic Rights Advocates (HERA) is a California statewide, not-for-profit legal service and advocacy organization dedicated to helping Californians — particularly those most vulnerable — build a safe, sound financial future, free of discrimination and economic abuses, in all aspects of household financial concerns. It provides free legal services, consumer workshops, training for professionals and community organizing support, create innovative solutions and engage in policy work locally, statewide and nationally.

About the Project on Predatory Student Lending

Established in 2012, the Project on Predatory Student Lending of the Legal Services Center of Harvard Law School represents former students of the predatory for-profit college industry. Its mission is to litigate to make it legally and financially impossible for the for-profit college industry to cheat students, and to relieve borrowers from fraudulent student loan debt.

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.