Former MA Corinthian Students Sue Betsy DeVos for Refusing Attorney General’s Application to Cancel Their Loans | Press Release

October 22, 2019

BOSTON– The Project on Predatory Student Lending today filed a lawsuit against Education Secretary Betsy DeVos on behalf of approximately 7,200 former Corinthian Colleges students in Massachusetts. The lawsuit demands that the U.S. Department of Education follow the law, grant the Attorney General’s borrower defense application and cancel the students’ fraudulent loans.

The new lawsuit, Vara v. DeVos, was filed in federal court in Boston and follows the October 2018 ruling in Williams v. DeVos, which acknowledged the Attorney General’s group borrower defense application as valid and laid the groundwork for Attorneys General across the country to apply for loan cancellation on behalf of students in their state who were cheated by predatory for-profit colleges. In the Williams decision, the judge not only found the Attorney General’s application to validly assert a borrower defense on behalf of all individuals who attended Corinthian’s Everest schools in Massachusetts, but also ordered the Department to consider the application, and to stop its aggressive collections by seizing borrowers’ tax refunds while the application was pending.

In response to that decision, the Department stopped collection and cancelled the debts of only the two plaintiffs, ignoring the judge’s assertion that the entire group of 7,200 Massachusetts students was protected by the Attorney General’s borrower defense application. Over the last year, the Department has continued to ignore the AG’s application, treating the other Massachusetts Corinthian borrowers as if they had not objected to the legality of their debt. Instead of cancelling these debts, the Department of Education continues to illegally collect on Corinthian borrowers.

“Everest promised me that they were the place to achieve my goal of bettering myself and helping other people by becoming a medical assistant. I did everything I was supposed to – raised my daughters while working and going to school all at the same time – but it turned out everything they told us was a lie,” said the named plaintiff, Diana Vara. “We got cheated and are now struggling to repay tens of thousands of dollars of debt for a worthless degree. The Massachusetts Attorney General told the Department of Education four years ago that Everest ripped off students, but they obviously don’t care because the Department has still been collecting on my debt and has even garnished my wages and taken my tax refunds. My life only got harder after Everest—the only upside is the strength of the other students I went to school with and that’s why I’m standing up with them for what’s right.”

“The evidence of abuse is indisputable. The only possible action to take is complete loan cancellation for all former Corinthian students of Massachusetts,” said Project on Predatory Student Lending Director Toby Merrill. “We will work with Attorney General Healey to force Betsy DeVos to follow the law and cancel the debts of 7,200 defrauded Corinthian students who were cheated and continue to suffer under the weight of these fraudulent debts. We thank Attorney General Healey for her commitment to holding Betsy DeVos accountable and for her dedication to standing up for students until these Corinthian loans are cancelled once and for all.”

Massachusetts Attorney General Maura Healey also filed a related case today in federal court, stating that the Department has failed to consider a group application submitted in 2015 by the AG’s Office on behalf of the students who attended Corinthian’s Everest College campuses in Massachusetts. AG Healey based the group application on the state’s successful lawsuit against Corinthian, which included a judgment that the school had violated the Massachusetts Consumer Protection Act and included more than 2,700 pages of supporting documentation about the school’s widespread illegal conduct and deception of student borrowers.

“Even when presented with irrefutable evidence of fraud and deception by Corinthian, Secretary DeVos continues to side with her allies in the predatory for-profit school industry, rather than follow federal law and provide our students with the relief they need to rebuild their lives. Together with the Project on Predatory Student Lending, we are suing to force the Department to do its job and cancel these loans,” said Massachusetts Attorney General Maura Healey.

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. The court found that:

  • The Attorney General’s application was a valid borrower defense application “for each and every individual” listed (all 7200+).
  • The Department had an obligation to consider, and then grant or deny this application.
  • The Department acted illegally when it took the Plaintiffs’ tax returns in 2016 because it did so without even considering the evidence in the AG’s application.

The Court gave the Department 60 days to issue a decision “on the merits of the AG’s application, with respect to the two individual plaintiffs.” The Attorney General weighed in on the case in support of the plaintiffs.

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.