Partial Borrower Defense Denials Violate Due Process, Privacy Act: Injunction Sought Against DeVos, Department of Education | Press Release
March 19, 2018
SAN FRANCISCO– A court filing over the weekend 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. Four borrowers, on behalf of a nation-wide class, seek an injunction to block the administration from applying its recently-announced plan to partially deny student loan relief to which defrauded borrowers are entitled, and that the Department had previously provided to certain cohorts of Corinthian borrowers through the borrower defense application process set up by the Department.
The motion for an injunction and amended complaint were filed in federal court in California as part of a class-action lawsuit brought by the former students of Corinthian-owned for-profit colleges. 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 Department of Education had already unfairly and unlawfully refused to cancel these bogus loans for so long,” Project on Predatory Lending attorney Joshua Rovenger said. “Now, it has secretly and illegally coopted Social Security data to try to argue for something less than the complete cancellation and refund that these borrowers are due. We are seeking to rescind these illegal partial denial notices that never should have been issued in the first place.”
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.
“This ‘average earnings rule’ is not only a theft of data, but more importantly, it is a fact-free attempt by the Department of Education to double cross borrowers who were scammed by Corinthian and then waited months or even years for the relief that the Department promised them,” said Noah Zinner, an attorney at Housing and Economic Rights Advocates who is representing plaintiffs.
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.
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.