Students Seek More Sanctions Against Secretary DeVos Following Disclosure of Tripled Illegal Loan Collections | Press Release

December 23, 2019

BOSTON– Former Corinthian Colleges students are asking a court to increase the monetary penalty against the Department of Education in light of the Department’s disclosure that it collected from nearly triple the 16,000 students it originally disclosed, and that originally got it held in contempt and fined $100,000. The Department’s latest report, along with additional information about its collections in violation of the court’s injunction, show that students have faced far more financial harm than previously disclosed. The motion reveals that the Department has collected more than $20 million dollars from former Corinthian students in violation of the injunction and has continued to illegally collect from students as recently as this month.

 

Today’s filing, by the Project on Predatory Student Lending and HERA is in a class action lawsuit brought by former Corinthian Colleges students. In the case, Secretary DeVos has been found in contempt of court and fined $100,000 in October when she disclosed that the Department had illegally attempted to collect on 16,034 former students of Corinthian Colleges.

 

Since the contempt finding and sanctions order, the Department revealed that the number of affected students and the harm experienced is far greater than what was known at the time the sanctions were issued. In seeking to increase the sanctions, this filing outlines the new facts showing why the $100,000 fine far less than the harm incurred. Among them:

  • The Department collected more than $20 million from students in violation of the injunction;
  • A December Compliance Report showed the Department had attempted to collect on approximately 45,000 students (three times more than originally reported);
  • The Department has continued to collect on students as recently as this monthin direct violation of the injunction. In fact, the Department has never been in compliance with the injunction, collecting on students from May 2018 through December 2019; and
  • Affidavits from former Corinthian students demonstrating the harm these collections have had on their lives, including hardships and even eviction.

 

“The malfeasance of Secretary DeVos continues to shock us.” Project on Predatory Student Lending Legal Director Eileen Connor said. “The harm these students have suffered from Corinthian Colleges and now the Department of Education are unfathomable. Students have had their tax refunds stolen, their wages seized, been evicted from their homes, and seen their lives ruined, many losing things that cannot be recovered, due to the Department of Education’s shameful actions. Today, students are seeking justice for the true harm done by Secretary DeVos’ illegal collections against them.”

 

The Project contacted Corinthian borrowers to gather information about the harm suffered by students as a result of the Department’s illegal collections. Among the findings:

 

  • 75% of borrowers who experienced involuntary collection stated that they were forced to borrow moneyto 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.
  • Many reported that their electrical service was shut offbecause of their inability to pay, and that they had to pay reconnection fees in excess of $150.
  • Some were evictedbecause 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 jobafter her car was repossessed because she was unable to make payments.
  • Others lost wagesbecause 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.

 

“I was devastated when the Department of Education started garnishing my wages and stole over $2,300 from me” says Naquasha Johnson, a former Corinthian student impacted by illegal collections.  “As a result of having my wages garnished, I could no longer afford both my car and rent payment.  I had to choose to either pay my car loan to keep my car, which I need for work. I chose to pay my car loan and as a result was evicted. The Department of Education should not have forced me into that position. I was working, I earned those wages. The education I received was worthless, however, the financial strain of the student debt follows me to this day.”

 

Calvillo Manriquez v. DeVos Case Background:

 

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 an 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 calculation, the Department secretly and illegally gathered information about borrowers’ earnings from the Social Security Administration.

 

In May 2018 and again in June 2018, a federal judge rebuked the Department of Education for its wrongful and illegal attempts to collect on the debt of students who were defrauded by 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 and DeVos admitted in a court filing that it violated this 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. Then, in a filing in December, Secretary DeVos revealed that – among other things – an additional 17,258 student borrowers were illegally collected upon by her Department in direct violation of the court order, more than quadruple the number she had previously disclosed. The report also revealed that the Department had still not returned all the money to borrowers. In December, the Department introduced another “formula” to deny full relief to cheated borrowers, very similar to the approach challenged in this case.

 

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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