Education Secretary Betsy DeVos on Monday was told in no uncertain terms that her refusal to abide by a 2018 order stopping her department from collecting on student loans made to predatory for-profit Corinthian College had the potential to land her in jail, though Magistrate Judge Sallie Kim made clear that was, for now, an unlikely outcome.
“At best it is gross negligence, at worst it’s an intentional flouting of my order,” Kim told lawyers from the education department in court Monday. “I’m not sure if this is contempt or sanctions.”
“I’m not sending anyone to jail yet,” Kim added, “but it’s good to know I have that ability.”
As journalist Sarah Jaffe noted on Twitter, “Betsy DeVos is in trouble.”
Kim ruled in 2018 that DeVos and the department had to stop collecting on student loans issued for attendees of Corinthian, which abruptly closed its doors in 2015. The school, an amalgam of distressed colleges bought and bundled by venture capitalists, was one of the largest chains of for-profit colleges in the U.S. before shutting down under a cloud of what The Washington Post said were “charges of fraud and predatory lending.”
Students at the schools applied for debt relief, and the Obama administration made some headway before clearing out for President Donald Trump’s White House and DeVos. Rather than issue blanket relief, DeVos and the department used a means-tested approach which compared post-college earnings from Corinthian graduates with those of other vocational schools.
As the Post explained:
DeVos started processing claims in December 2017, announcing the approval of 12,900 applications and denial of 8,600 claims from former Corinthian students. She said applicants would receive full loan forgiveness if their earnings are less than 50 percent of those of their peers. If their pay is at or above that threshold, the department would provide relief on a sliding scale.
In 2018, Kim found that the practice violated the Privacy Act by using borrowers’ Social Security numbers and other information to find earning information. Kim ruled that the department had to stop the practice and immediately cease all collection actions on the debt of the Corinthian students.
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That is not, however, what happened, as the Post explained:
In a September court filing, the Education Department revealed that more than 16,000 former Corinthian students “were incorrectly informed at one time or another … that they had payments due on their federal student loans” after a federal judge put a hold on collections in May 2018.
On Monday, Kim laid into department officials for ignoring her ruling.
“There have to be some consequences for the violation of my order 16,000 times,” said Kim.
No matter what punishment the judge delivers to the department, Harvard University’s Project on Predatory Student Lending legal director Eileen Connor told Bloomberg, the case for contempt seems straightforward.
“We think contempt is clear on the record presently before the court,” said Connor, “and expect that the court will issue that finding, regardless of what sanctions are imposed.”
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