Court Tells Department of Ed to Stop Debt Collections for Defrauded Borrowers

A federal district court this week ordered the Trump administration to halt collections on loans held by former Corinthian Colleges students while it sorts out the legality of a system to provide partial debt relief to borrowers who were defrauded or misled by their institution.

Education Secretary Betsy DeVos announced that partial relief plan in December, and several borrowers sued shortly thereafter to block the plan.

Federal Magistrate Sallie Kim ruled in May that the plan violated the Privacy Act and ordered the department to stop collecting on the student loans of the four plaintiffs in the case. Still unresolved is whether an alternative partial relief plan devised by the department may be legal. Kim this week ordered that until that question is settled, the department must stop collecting on the loans of tens of thousands of other Corinthian borrowers who have filed attestation forms saying they were misled by their college.

“The Department of Education has now been rebuked in court not once, but twice for violating the rights of students it should be serving,” said Toby Merrill, a lawyer at the Project on Predatory Student Lending, which is representing the students in the case. “Corinthian ripped off hundreds of thousands of students and the Department of Education is making it worse by collecting their illegal debts, prolonging their suffering. The Department has the power and the obligation to do the right thing and immediately cancel the debt of cheated Corinthian borrowers, but if they continue to refuse to do it on their own, we will fight them in court until they come around.”