A federal court ruled in favor of fining United States Secretary of Education Betsy DeVos $100,000 for being in contempt of court after she neglected to stop loan payment collections from former students of a now-obsolete group of for-profit colleges.
The decision arises from a 2017 class action lawsuit filed on behalf of former Corinthian Colleges students against the Department of Education.
According to the judge, DeVos violated an order to cease the collections from student defrauded by Corinthian Colleges. The Department of Education issued a video statement saying that around 16,000 parents and students were “accidentally” billed for loan payments, and have since been reimbursed.
After Corinthian Colleges dissolved in 2014, borrowers were owed debt relief, so the money paid through the fine will be used to support legal aid and expenses for students impacted by the lack of debt relief from the Department of Education.
Corinthian Colleges was found to be making false claims about its job placement rates for its graduates, and under both its own rules and a preliminary injunction completed last year, the Department of Education was ordered to refund all money borrowed by students who had attended the for-profit college chain at the time that it was misrepresenting job placement figures.
According to the most recent ruling, however, the Department of Education “erroneously” sent messages to over 16,000 former students that they needed to pay their loans. Although some of the impacted individuals made payments voluntarily, others had their tax refunds seized or wages garnished through government action. The judge’s opinion then claimed that third-party organizations were involved in loan collection, and that the Education Department did little beyond email correspondence to ensure that the prior court orders had been followed.
This is not the first case brought forth regarding Corinthian Colleges and its borrowers. The regulations for loan forgiveness regarding Corinthian. The Department of Education issued a statement that it would grant partial to complete loan relief to affected borrowers based on their income. Because the information regarding their income was obtained from the Social Security Administration, borrowers alleged that their privacy had been violated and that the regulation change was therefore impermissible.
Regarding the recent court ruling, it is rare for a federal court to find a Cabinet secretary in contempt of the court. Outrage has been sparked over the issue, and Sen. Elizabeth Warren, a current presidential candidate, has even called for DeVos’ resignation over the issue.