New Data Reveals DeVos Illegally Collected From Additional 17,258 Corinthian Students | Press Release

December 3, 2019

BOSTON– In a new filing today, U.S. Secretary of Education Betsy DeVos revealed that an additional 17,258 student borrowers were illegally collected upon by her Department in direct violation of a court order, more than quadruple the number she had previously disclosed.

This filing reveals that the harm to students was significantly higher than previously reported, and that the Department has still not returned all the money to borrowers despite a contempt finding by a federal judge. Secretary DeVos had been found in contempt of court in October when she previously disclosed that the Department had illegally attempted to collect on 16,034 former students of Corinthian College. The Department now acknowledges that number to be an additional 29,000 people. This is part of a class action lawsuit on behalf Corinthian College students brought by the Project on Predatory Student Lending and HERA.

Additional disclosures by the Department today include:

  • An additional 11,500 student borrowers made payments following the Department’s illegal collection efforts (the Department previously disclosed only 3111 borrowers had made payments);
  • An additional 550 individuals experienced involuntary collection in the form of the seizure of tax refunds or wage garnishment (the Department previously disclosed 1808 borrowers were subject to involuntary collection);
  • An additional 5000 individuals had adverse credit reporting (the Department previously said only 901 individuals were impacted in this way); and
  • The Department has not yet returned all of the money it had wrongly taken in violation of the injunction (76 borrowers have not yet been refunded voluntary payments and 18 individuals have yet to be refunded for involuntary collection).

“Students and taxpayers should be infuriated by the Department of Education’s complete disregard for student borrowers,” Project on Predatory Student Lending Director Toby Merrill said. “Secretary DeVos has already been found in contempt of court for her illegal collections on students. Now we find out the impact was far greater than previously reported, and she still hasn’t returned all the money owed to students. It is galling, it’s unlawful, and it can’t be tolerated.

Borrowers who experienced these illegal collections and have been contacted by the Project on Predatory Student Lending report significant harm to their lives and finances:

  • 75% of borrowers who experienced involuntary collection stated that they were forced to borrow money to cover expenses during the time period that they were unlawfully deprived of money in order to pay for rent, food, transportation, child care, and more.
  • Amounts borrowed ranged from $500 to over $10,000. Some borrowed money from friends and family, while others borrowed money from payday and internet lenders or put expenses on credit cards.
  • They reported borrowing (or charging) money at interest rates of between 15 and 35 percent, and in some cases over 100 percent.
  • They reported being unable to make timely payments on other financial obligations and consequently were assessed late fees or penalties.
  • Students reported repeated late fees of between $25 and $100 on their utility accounts.
  • Many reported that their electrical service was shut off  because of their inability to pay, and that they had to pay reconnection fees in excess of $150.
  • Some were evicted because of inability to pay rent and incurred moving and other expenses related to their need to find replacement housing.
  • One individual reported being fired from her job after her car was repossessed because she was unable to make payments.
  • Others lost wages because they were unable to afford to commute to their job, could not afford childcare, or lost their job when their car broke down and they could not afford to repair it.

Case Background: Calvillo Manriquez v. DeVos

Under the Department of Education’s watch, Corinthian took in billions of dollars in taxpayer money and used boiler-room-style high-pressure tactics and racially-targeted advertising to build its business, all while producing outcomes for students so terrible that it had to lie to stay in business. Corinthian filed for bankruptcy and avoided its debts, but the students it cheated were left thousands of dollars in debt for an education they never received.

Between 2015 and 2016, the Department informed certain former students that they were eligible for a full loan discharge on account of Corinthian’s misconduct. However, in March 2018, the Department notified these 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 had to repay a majority their loans. In coming up with this 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 from predatory institutions like Corinthian by publishing “gainful employment” metrics.

In May 2018 and again in June 2018, a federal judge rebuked the Department of Education for its wrongful and illegal c attempts to collect on the debt of students who were defrauded by the for-profit Corinthian Colleges, ruling that the Department must stop collecting on the loans of tens of thousands of Corinthian students. The preliminary injunction and subsequent order required the Department to stop applying its illegal “average earnings rule” to these students, and prevented the Department from further collecting on the plaintiffs’ loans, including through wage garnishment and seizure of tax refunds.  For more information about the case and the preliminary injunction, click here.

In September 2019, the Department of Education and DeVos admitted in a court filing that it violated this federal court order by continuing to illegally collect on the student debt of thousands of former Corinthian students. In October, 2019, Secretary DeVos was found in contempt of court for her actions.

Today’s filing was part of the Department’s compliance report required in connection with that contempt finding.

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.