Sallie Kim ’86 threatens Betsy DeVos with jail in student loan debt case| Oct 15, 2019
U.S. Secretary of Education Betsy DeVos has found herself in trouble with Magistrate Judge and University alumna Sallie Kim ’86 of the U.S. District Court for the Northern District of California.
On Monday, Oct. 8, Kim presided over a hearing regarding a lawsuit filed against the Department of Education’s continued collection of student loan debt from students who were defrauded by Corinthian Colleges, a defunct for-profit education company.
Kim lifted a previous stay on the lawsuit, meaning that hearings in the next few weeks will determine whether DeVos will face sanctions.
“I'm not sure if this is contempt or sanctions. I'm not sending anyone to jail yet, but it’s good to know I have that ability,” Kim said, according to The Washington Post. “I’m most concerned with helping the people who were harmed by this — this problem that the government created.”
In a spring 2018 ruling, Kim issued an injunction forbidding the Department of Education to continue collecting student loan debts from 16,000 former students of Corinthian Colleges.
The for-profit college system closed in April 2015, after being implicated in fraud and predatory lending.
The lawsuit argues that the Department of Education’s actions in continuing to collect payment violate a form of federal loan forgiveness known as “borrow defense to repayment.” The rule means that “[b]orrowers may be eligible for forgiveness of the federal student loans used to attend a school if that school misled them or engaged in other misconduct in violation of certain laws,” according to Federal Student Aid, an office of the Department of Education.
Though the rule, which was created in the mid-1990s and has been adjusted multiple times since, is not used often, it applied to the closure of Corinthian Colleges.
Harvard’s Project on Predatory Lending reports that since the initial injunction was issued in 2018, the Department of Education has requested incorrect loan payments from about 16,000 students, that 3,289 students had given the government unnecessary payments because of the solicitation, that over 1,000 students paid debts to the department involuntarily through grazed wages and tax refunds, and that others had worsened credit scores because of the situation.
Forbes reported Kim’s astonishment at the behavior of the Department of Education.
“At best it is gross negligence; at worst it’s an intentional flouting of my order,” Kim said.
Kim was also frustrated by how relaxed the department was in executing her initial orders. Several emails were sent to debt collection companies to halt the loan collection, but The Washington Post reports that no clear instructions were given, leading to the wrongful payment by thousands of students.
Not only did the department violate the injunction, but Kim found that they also violated privacy law.
In 2017, when responding to Corinthian Colleges’ closure, the Department of Education ignored the “borrower defense to repayment” rule and decided what percentage of an individual’s student loans to forgive by comparing the income of Corinthian students to those from other vocational schools.
Kim ruled that the Department of Education’s use of Social Security information in the process violated privacy laws.
Kim has given both sides two weeks to compile arguments on sanctions. DeVos and the Department of Education’s lawyers argue that sanctions are unjust because the department was acting in “good faith.”
At the University, Kim concentrated in the Woodrow Wilson School. She later attended Stanford Law School.