Breaking: Judge Holds DeVos in Contempt For Pressing Students To Make Bogus Loan Payments
U.S. Magistrate Judge Sallie Kim today issued an order holding Secretary Betsy DeVos and the Department of Education in contempt of court and fined them $100,000 for violating her order that they stop trying to collect on loans from former students of for-profit Corinthian Colleges schools.
The Department, during the Obama administration, determined that the loans should be discharged because of flagrant predatory abuses by Corinthian against students. DeVos refused to implement that action, insisting instead that students who hadn’t been left completely unemployed deserved less than full loan relief. After students sued, Kim issued an injunction temporarily directing the Department to stop trying to collect on the loans. The Department’s contractors, however, in the cases of some 16,000 former Corinthian students did not stop collecting, and when they were caught, the Department’s lawyers blamed miscommunications with the agencies.
That excuse didn’t wash with Judge Kim. She found that the DeVos Department made “only minimal efforts to comply” with her order. She took the rare step of holding a cabinet secretary in contempt and also ordered the Department to pay $100,000 into a fund held by the students lawyers, who are from the Harvard Law School Project on Predatory Student Lending and California-based Housing and Economic Rights Advocates.
It’s not much compensation for the ex-students, some of whom had their paychecks garnished or their federal tax refunds confiscated when they didn’t pay the bogus bills. But maybe they’ll recover more when the lawsuit reaches its conclusion.
Judge Kim also ordered DeVos’s Department to submit monthly reports documenting its compliance with her previous order and to accurately inform borrowers about the status of their loans. She also wrote that should would consider additional sanctions if DeVos does not comply.
Chided on Twitter earlier this month by Senator Elizabeth Warren (D-MA) for the phony loan collections, DeVos replied, “Loan servicers made an error on a small # of loans. We know & we’re fixing it.” DeVos concluded the tweet by telling Warren, “It should be beneath a senator to lie, but unfortunately it’s not your first time…this week.” DeVos attached a Fox News article making a specious charge that Warren was not fired from a teaching job over her pregnancy, as the senator has asserted.
[UPDATE: The Department of Education tweeted it was “disappointed in the court’s ruling” and blaming its servicers for “unacceptable mistakes.” The tweet included a video from Mark Brown, head of the department’s Office of Federal Student Aid, who denied any “ill intent” and said Department officials “have taken swift action to correct the mistake.”]
Judge Kim’s ruling follows other troubling news in recent days about DeVos and Corinthian:
(1) Trump Ukraine stooge / ambassador Gordon Sondland invested in a company that serviced high-interest loans to students of the same predatory Corinthian schools.
(2) House Education Committee chairman Bobby Scott threatened to subpoena DeVos for stonewalling on document requests, and he released evidence that the DeVos Department aided efforts by another predatory college chain, Dream Center Education Holdings, to deceive its students.