Judge Grants April 30 Hearing On Injunction Sought Against DeVos, Department of Education | Press Release

March 22, 2018

SAN FRANCISCO– A federal Judge has set an April 30 hearing date on a preliminary injunction sought against Secretary Betsy DeVos and the federal Department of Education seeking to block the administration from applying its decision to partially deny loan relief applications brought by defrauded former students of for-profit colleges.

Four borrowers filed the motion for a preliminary injunction and amended complaint in federal court in California over the weekend on behalf of a nation wide class of former students of Corinthian-owned for-profit colleges. The filings revealed that the U.S. Department of Education secretly, illegally, and unconstitutionally used Social Security data to deny loan discharges to students cheated by Corinthian Colleges, Inc.

Ain initial hearing in the case was held on Monday in California and the Judge granted the borrowers’ request for an April 30 hearing date on the preliminary injunction motion. The borrowers and the putative class are represented by the Project on Predatory Student Lending of the Legal Services of Harvard Law School and Housing and Economic Rights Advocates.

Background on the case

Earlier this month, the Department notified certain former students that, because their “average earnings” were not less than half of the “average earnings” of some unspecified group of students who went to a different, non-Corinthian school, they must repay their loans. In coming up with this murky and convoluted calculation, the Department secretly and illegally gathered information about borrowers’ earnings from the Social Security Administration. Perversely, the Department obtained the data from SSA pursuant to an information sharing agreement entered into for the purpose of protecting the public at large from predatory institutions like Corinthian by publishing “gainful employment” metrics.

For borrowers who were scammed by Corinthian and then waited months or even years for the relief that the Department promised them, the “average earnings rule” is yet another government-inflicted intensification of Corinthian’s harms.

One of the named plaintiffs representing the nation-wide class is Jennifer Craig of Baldwin Park, California. She attended a medical billing and coding program at the Corinthian-operated Everest College—City of Industry. Recruiters convinced her to enroll in the program with assurances that she would get a job, using falsified job placement statistics. Despite completing the program, she has never been able to get a job as a medical biller. She has only been able to get the same minimum-wage jobs that she worked at before going to Everest. She applied for cancellation of her loans in 2016, using an “attestation form” that the Department of Education created especially for Corinthian borrowers. Last week, she was informed by email (included in the filing) that the Department had applied its “average earnings” calculation, and she must repay 80% of her loans. She and her husband, who lost his job earlier this year, are barely able to make ends meet. They have three children, including a three-month old daughter.

Another family impacted by the Department’s actions are Zovinar Tchouldjian and Alina Farjian of Los Angeles. Alina, who submitted a declaration in support of the motion for preliminary injunction, attended Everest in Receda for medical assisting. Her mother, Zovinar, borrowed Parent PLUS loans to help pay for the program, despite her reservations that the school could support her daughter, who was in special education programs throughout her schooling. They were convinced by the job placement rates that Everest recruiters showed them. Alina has never worked as a medical assistant. She currently drives for Lyft. Both Zovinar and Alina applied to the Department for loan cancellation. Zovinar’s loans were completely cancelled months ago. Alina learned last week that the Department had used its “average earnings” rule to determine that she must repay 70% of her loan.

The plaintiffs are asking the court to order the Department to stop applying the Average Earnings Rule; to keep applying the Job Placement Rate Rule by granting complete relief to borrowers in the findings cohort; and to rescind the partial denials it has issued. The Department’s current conduct is illegal in numerous ways, including:

  • The Department’s failure to explain its rationale, its inability to provide borrowers with the data underpinning its calculations, and its illogical reliance on this data to decide individual claims violate the Due Process Clause of the Constitution and is arbitrary and capricious;
  • The Department’s capricious adoption of the Average Earnings Rule constitutes impermissible retroactive rulemaking in violation of the Administrative Procedure Act;
  • The Department’s abandonment of the Job Placement Rate Rule is arbitrary and capricious and denies class members the relief they have been promised and on which they relied; and
  • The Department’s use of average earnings violates the Privacy Act by secretly and unfairly deploying individuals’ information to determine their rights.

Massachusetts Senator Elizabeth Warren raised flags in January about the Department’s misuse of Social Security data in a letter to the Department’s Inspector General, asking for an investigation into the use of earnings data to make decisions on partial relief for defrauded student loan borrowers.

The borrowers and the putative class are represented by the Project on Predatory Student Lending of the Legal Services of Harvard Law School and Housing and Economic Rights Advocates. The First Amended Complaint is posted here, and the Motion for a Preliminary Injunction here.

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 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. It has also brought its clients’ experiences to bear on federal and state policymaking.