Two Key Hearings Scheduled for Next Week in Corinthian and ITT Cases | Press Release

June 8, 2018

Hearing on Monday Follows Recent Preliminary Injunction Preventing Department of Education from Collecting Corinthian Students’ Debts Based on “Average Earnings Rule”

Hearing on Wednesday Will Determine Final Approval For Class Settlement in ITT Bankruptcy

BOSTON – Two court hearings are scheduled for next week in key cases that assert the rights of federal student loan borrowers who were cheated by the for-profit colleges Corinthian and ITT Tech.

The hearing in San Francisco on Monday, June 11 involves the Department of Education’s continued refusal to grant complete loan cancellation to former students of for-profit Corinthian Colleges.

This hearing in the case of Calvillo Manriquez v. DeVos follows the recent groundbreaking decision by the judge to grant a preliminary injunction stopping the Department of Education from applying its illegal “average earnings rule” to cheated former students of Corinthian Colleges, and preventing the Department from further collecting on the plaintiffs’ loans. The court found that the Department had clearly violated federal law by gathering applicants’ information from the Social Security Administration and using it to partially deny Corinthian borrowers’ applications for loan discharge. The court will hear arguments Monday on whether to order the Department to award complete loan cancellation to Corinthian students and whether to order the Department to reveal documents.

The  hearing in Indianapolis on Wednesday, June 13 will determine whether to grant final approval of the proposed settlement between students and the trustee in the ITT bankruptcy. The settlement, which received preliminary approval from the Bankruptcy Court in Indianapolis in January, would recognize a $1.5 billion claim against ITT by students who attended the schools between 2006 and 2016 for widespread, systematic, unfair and deceptive practices and breach of contract. Key terms of the agreement include more than $500 million in debts to ITT cancelled and $3 million that have already been returned to students who had paid the company directly since it filed for bankruptcy.

Case Background: Calvillo Manriquez v. DeVos

Under the Department’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 its debts were discharged, but the students it cheated were left thousands of dollars in debt for an education they never received.

In March, the Department notified some 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 from predatory institutions like Corinthian by publishing “gainful employment” metrics. For more information about the case and the  preliminary injunction, click here.

The borrowers are represented by the Project on Predatory Student Lending of the Legal Services Center of Harvard Law School and Housing and Economic Rights Advocates (HERA).

Case Background: Villalba et al. v. ITT

ITT deceived and misled students about financial aid and costs of attendance, job placement and salaries, the quality of equipment and experience of instructors, the desirability of ITT graduates by employers, ITT’s programmatic accreditation, the transferability of its credits, and career placement assistance. The students’ allegations also included ITT’s use of high-pressure sales tactics to get students to enroll and remain enrolled. In January 2017, former ITT students filed a class complaint and proof of claim in the bankruptcy, laying the groundwork for the settlement proposal heard in January and expected to be finalized on June 13. For more information about the settlement, click here.

Over the last decade of its existence, ITT took in over $7 billion in student aid, the majority of which came in the form of federal student loans. Former ITT students have submitted over 7000 borrower defense to repayment applications to the Department of Education. Despite the clear case that students have a defense to the repayment of their loans because of ITT’s fraud, only a handful of those applications have been granted, and no new applications have been granted since January 20, 2017.

The student class is represented by the Project on Predatory Student Lending of the Legal Services Center of Harvard Law School and Jenner & Block.

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.