Betsy DeVos held in contempt for violating court order on student loan collection

Posted at 10:23 PM, Oct 24, 2019
and last updated 2019-10-24 22:23:47-04

Education Secretary Betsy DeVos and the Department of Education were held in civil contempt by a federal judge on Thursday and ordered to pay $100,000 to student borrowers who took out loans to attend a now defunct for-profit college.

The judge had previously ordered the Department of Education to stop collecting on the loans. But last month, the department admitted that more than 16,000 borrowers were incorrectly informed that they owed a payment on their debt after the court order. About 1,800 had their wages garnished and more than 800 were mistakenly subject to adverse credit reporting.

US Magistrate Judge Sallie Kim wrote in her order Thursday that “there is no question” that DeVos and the department violated the preliminary injunction and “also no question that defendants’ violations harmed individual borrowers.”

“The evidence shows only minimal efforts to comply with the preliminary injunction,” she wrote.

The plaintiffs in the case are former students of the now-defunct Corinthian Colleges. They are represented by lawyers at the Project on Predatory Student Lending and Housing and Economic Rights Advocate who argue that borrowers are entitled to debt relief under an Obama-era rule because their schools shut down.

Corinthian collapsed in 2015 after it was fined by the government for misleading prospective students with inflated job placement numbers. It left thousands of students without a degree and saddled with student debt. The Obama administration told impacted borrowers that they would receive debt relief.

But under the Trump administration, the department attempted to change the way it calculated how much of a borrower’s debt would be forgiven. The Project on Predatory Student Lending and Housing and Economic Rights Advocate filed its case in 2017 and the judge granted a preliminary injunction in May 2018, ordering the department to stop collecting on the debts.

“Taking this rare and powerful action to hold the Secretary of Education in contempt of court shows the extreme harm Betsy DeVos’ actions have caused students defrauded by for-profit colleges,” said Project on Predatory Student Lending Director Toby Merrill in a statement.

A spokeswoman for the Department of Education did not immediately respond to a request for comment.