Borrowers Seek to Hold Secretary DeVos in Contempt of Court for Refusing to Decide Borrower Defense Application | Press Release

October 21, 2020

The Department of Education has Failed to Comply with Order to Decide the Massachusetts Attorney General’s Borrower Defense Application for 7,200 former Corinthian Students 

 

In 2019, a Court Held DeVos in Contempt in Another Project on Predatory Student Lending Lawsuit  

 

BOSTON – Student borrowers today filed a motion to hold Secretary of Education Betsy DeVos in contempt of court for failing to comply with an order to decide the borrower defense application filed by the Massachusetts Attorney General on behalf of approximately 7,200 former Corinthian Colleges students in Massachusetts.

 

The motion comes four months after a federal judge ordered the Department of Education to grant the Attorney General’s application and cancel the federal student loans borrowed on behalf of all 7,200 former Corinthian Colleges students in Massachusetts in the lawsuit Vara v. DeVos. The judge directed the Department to issue a “reasoned decision” by September 7, 2020, but the Department has failed to do so.

 

Student borrowers and the Project on Predatory Student Lending have previously succeeded in holding Secretary DeVos in contempt of court in the lawsuit Calvillo Manriquez v. DeVos, after the Department violated a court order to stop collecting on students’ loans.

 

“These cheated Corinthian students have been battling for more than 5 years to get their bogus loans cancelled,” said Project on Predatory Student Lending Director Toby Merrill. “Now, even after a federal judge has ordered the Department of Education to grant the Attorney General’s application and cancel these loans, the government has chosen to ignore the court order and refuses to issue a reasoned decision on Attorney General Healey’s claim. We are not proud that our Secretary of Education continues to find herself in contempt of court, but we will continue to help student borrowers hold her accountable.”

 

“These borrowers, mostly Black and Latinx students, were defrauded by a predatory for-profit school and abandoned by their federal government,” said Massachusetts Attorney General Maura Healey. “Now, even with a court order, Betsy DeVos has refused to do the right thing. These students won’t go away until their loans are cancelled, and our office and the Project on Predatory Student Lending will be right there with them.”

 

According to the decision issued in June 2020:

  • “Overwhelming” and “uncontradicted” evidence establishes that the plaintiffs and their classmates are entitled to cancellation of their loans because of Corinthian’s flagrant and widespread misconduct;
  • So that students are no longer caught in “a game of ping-pong,” the Court instructed the agency to take action within 60 days consistent with the court’s order granting relief to all borrowers;
  • The Department of Education can’t escape its obligations under the law by simply writing off the loans of people who happen to sue;
  • Contrary to the Department’s assertions, a federal court may review the Department’s actions and inactions with respect to borrower defense;
  • The Department must act in a consistent and rational manner and must explain its actions;
  • “Overwhelming” evidence shows that ED has, in the past, repeatedly exercised its discretion to cancel federal student loans in response to an application, supported by evidence, from an Attorney General.

 

The Department of Education has appealed this ruling.

 

The Vara v. DeVos lawsuit was filed in federal court in Boston in October 2019, following students’ October 2018 victory in Williams v. DeVos. The ruling in that case acknowledged that the Attorney General had lodged a borrower defense application on behalf of all Massachusetts Corinthian borrowers, and ordered the Department to consider the application and to stop seizing borrowers’ tax refunds while the application was pending. That case laid the groundwork for Attorneys General across the country to demand that the Department consider their applications for loan cancellation on behalf of students in their state who were cheated by predatory for-profit colleges.

 

Background:

 

In 2015, the Massachusetts Attorney General asked the Department of Education to immediately cancel the debts of ALL of the approximately 7,200 students who borrowed federal student loans to go to a Corinthian-operated school in Massachusetts because Corinthian’s extensive fraud means that all of them have borrower defenses. She supported her request with thousands of pages of evidence, and a state court found in her favor in a case against Corinthian, ordering the then-bankrupt company to repay every penny that it collected from Massachusetts students. The company never paid a dime, and the Department never gave a definitive response to the application.

 

In 2016, the Project on Predatory Student Lending filed the lawsuit Williams v. DeVos on behalf of two former Corinthian students whose tax refunds were seized, despite the fact that they were included in the group discharge application. The Department of Education is prohibited from seizing tax refunds to collect debts that are not legally enforceable, and without deciding on the AG’s borrower defense application, the Department was unable to find the plaintiffs’ debts legally enforceable.

 

In October 2018, the court agreed that the Department had unlawfully collected on these students’ loans, and that students are protected by the Attorney General’s group borrower defense application.

 

In February 2019, at a hearing on compliance with the October order, the Department made clear that it was still not treating the AG’s application as a valid borrower defense application for the 7200+ people, and ignoring the court’s order to make a decision on the application as to the two plaintiffs. The court gave the Department 30 more days to comply. Then the Department voluntarily cancelled the loans of the two plaintiffs, in an attempt to end the case without contending with the AG’s submission.

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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