Contempt for Courts, Students

Terry H. Schwadron

Oct. 27, 2019

Betsy Devos’ Department of Education not only screwed up, not only punished students over the claims of for-profit colleges for illegally extending student loans, but DeVos also showed contempt for the courts where the issue was adjudged.

As a result, she, the department — and you and I as taxpayers — owe the court $100,000 for her insolence.

I have an idea: Why not get Betsy DeVos to pay the contempt citation? How about she says she’s sorry? How about she resign?

Here’s the deal: Magistrate Judge Sallie Kim of the federal District Court in San Francisco fined DeVos this week for contempt of court, ruling that she had violated an order to stop collecting on loans owed by students from a now-defunct for-profit chain of colleges. The contempt citation comes with a $100,000 fine that will go toward various remedies for students who are owed debt relief from a previous finding that they had been defrauded by Corinthian Colleges, which collapsed in 2014.

The ruling is being seen as a victory for 60,000 students who have been on a financial roller coaster since Corinthian went belly up, after officials found that Corinthian had lured students through deceptive recruitment practices and falsified job placement rates.

But really, scratch the surface here and you’ll see the big lean by DeVos towards for-profit schools over public schools, and an anti-student bias.

Go back to 2017. A class-action lawsuit was filed by the Project on Predatory Student Lending of the Legal Services Center of Harvard Law School and the group Housing and Economic Rights Advocates, both of which represent former Corinthian students. For more than a year, the students’ lawyers argued that DeVos had illegally punished thousands of cheated students who were owed relief from the federal government.

The official Education Department statement came in a video tweet from Mark Brown, chief operating officer of the Education Department’s Federal Student Aid office. He said that loan servicers had “mistakenly” billed about 16,000 students and parents with no ill intent.

He added that the department had taken action to respond, including refunding nearly all payments that borrowers should not have had to make, returning tax refunds and wages that were seized, and updating credit reports for affected students and parents. He said the department had also formally reprimanded loan servicers that collected debts, and initiated personnel action against Education Department employees who failed in their oversight roles.

Nevertheless, the department has moved slowly, and appeals about the outstanding payments had affected only a fifth of the affected students.

During the Obama Administration, Arne Duncan, then education secretary, announced that the department would forgive the students’ debts. Instead, DeVos instituted a new system for borrower defense claims that granted little to no debt forgiveness if those students were found to have earned a livable wage. The group representing students filed its challenge, and last year, Magistrate Kim found that system illegal.

Kim said that the Education Department had violated borrowers’ privacy by obtaining and misusing their earnings data from the Social Security Administration. She issued an injunction ordering the department to stop using the data and collecting the debts of Corinthian students. The department appealed the decision to the United States Court of Appeals for the Ninth Circuit and is waiting for a ruling. But the department has kept pursuing the debts and garnished students tax refunds and wages.

The department’s loan servicers sent at least 16,000 Corinthian borrowers bills for payments they did not actually owe, reported The New York Times. The students’ lawyers asked the court to halt those collections and punish the department for its actions.Kim made it clear this month that she believed the department had acted badly. “I’m astounded, really,” she said during a fiery hearing. “I feel like there have to be some consequences for the violation of my order 16,000 times.” She wrote that the department had made “only minimal efforts to comply” with her order, and that it had “harmed individual borrowers who were forced to repay loans.” She also ordered the Education Department to file monthly status reports detailing its compliance.

The Project on Predatory Lending said that more than 3,000 borrowers made payments that they were not, in fact, required to make. More than 800 students have had their credit reports tarnished, and 1,800 had their wages garnished or tax refunds seized. More than 1,100 remain in limbo because the department has not yet confirmed whether they are in the correct repayment status.

The department has essentially stopped evaluating borrower defense claims — leaving borrowers in limbo while it waits for the courts to resolve its appeal. The agency had 210,000 pending claims awaiting a decision as of June, up from the 106,000 claims it had sitting in its queue a year earlier.

In August, the Education Department rewrote its rules for the borrower-defense program, making it significantly harder for borrowers to qualify. The new policies will apply to federal student loans made from July 2020 onward.

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