Last week, U.S. Magistrate Judge Sallie Kim ’86 fined U.S. Education Secretary Betsy DeVos $100,000 for contempt of court for violating a preliminary injunction.
The Department of Education will be expected to pay, and the money will be given to the association of students affected by the fraud committed by Corinthian Colleges, Inc., a for-profit, post-secondary education conglomerate that operated a host of degree-awarding schools across the United States and Canada. In 2014, the U.S. government revoked federal funds for Corinthian after it was discovered that the company falsified its graduation and job placement rates. This caused most of Corinthian’s schools to apply for Chapter 11 bankruptcy. Students affected by the organization’s tactics were eligible to receive full relief from any federal loans through a process termed the “Corinthian Rule.”
However, both current and former students of Corinthian schools were expected to pay any outstanding debt accrued from their time at the institution.
Senator Elizabeth Warren, who had launched an investigation of the incident, wrote to then-Education Secretary John B. King Jr. that “it is unconscionable that instead of helping these borrowers, vast numbers of Corinthian victims are currently being hounded by the department’s debt collectors — many having their credits slammed, their tax refunds seized, their Social Security and Earned Income Tax Credit Payments reduced, or wages garnished — all to pay for fraudulent debts.”
The Department of Education under the Obama Administration had provided full relief to affected students. This changed under President Trump and Secretary DeVos, whose Education Department, according to Judge Kim, “had erroneously sent 16,034 notices that payments were due to Corinthian borrowers. In response to those notices, 3,298 Corinthian borrowers made one or more payments … The Department also mistakenly notified at least 3,000 Corinthian borrowers that their loans were entering repayment, rather than stopped collection or forbearance status.”
The new government reduced the amount of relief starting on Jan. 20, 2017 — the day of Trump’s inauguration. Over the course of the next few months, compensation was completely terminated.
Mark Brown, Chief Operating Officer of Federal Student Aid at the Department of Education, deemed the incident an accident, saying that “unfortunately, loan servicers mistakenly billed approximately 16,000 students and parents” in a recent video put out by the department. He added that “we take full responsibility” and that “as Secretary DeVos has directed, we are putting students and parents at the heart of everything we do.”
According to Brown, “99 percent of customers who made payments on their federal student loans when they didn’t need to have been refunded.”
Nonetheless, Judge Kim ruled that the Department of Education “has not provided evidence that they were unable to comply with the preliminary injunction,” which is a court order that prevents the involved parties from taking a drastic course of action until the judge gives a ruling.
It was issued after it was discovered that the new government had limited relief for affected Corinthian students.
Judge Kim ruled that “the evidence shows only minimal efforts to comply with the preliminary injunction. The Court therefore finds Defendants in civil contempt.”
The Department of Education had until Nov. 1 to submit a “status report” on how they intend to comply with the injunction. A final plan of action is due by Nov. 15.