A federal district court judge on Thursday held Education Secretary Betsy DeVos in contempt of court for the improper collection of student loans from several thousand borrowers who attended now-defunct for-profit colleges. The ruling -- a rare outcome for a federal agency -- was sought by Harvard Law School's Project on Predatory Student Lending after the Education Department acknowledged collecting on the loans of former Corinthian Colleges students who had sued for debt relief.
Federal Magistrate Judge Sallie Kim ordered the department to pay a $100,000 fine and submit monthly reporting on those borrowers. The judge left open the possibility of additional sanctions, including the appointment of a special master to monitor the department.
The former Corinthian students sued the Education Department last year after DeVos announced a new standard to award partial relief to students who submitted successful borrower-defense claims.
Kim ruled last year that the partial relief standard was illegal because it improperly used Social Security Administration data. The Trump administration appealed that ruling at the Ninth Circuit Court of Appeals. But Kim ordered the Education Department to halt collections for the former Corinthian students until the legality of the partial relief scheme was settled.
A September court filing by the department revealed that it had improperly sought to collect on loans from more than 16,000 students. More than 1,800 of those students were subject to involuntary collections like wage garnishment or seizure of tax refunds.
In an exchange on Twitter this month with Senator Elizabeth Warren, a Massachusetts Democrat, DeVos blamed the issue on an error by loan servicers, the federal contractors that collect student loan payments on behalf of the federal government.
Loan servicers made an error on a small # of loans. We know & we’re fixing it. I’m leading a total overhaul of @FAFSA loan servicing, which you know and support. It should be beneath a senator to lie, but unfortunately it’s not your first time...this week: https://t.co/AyVcifjHuR https://t.co/ZdvrSJ1l9v— Secretary Betsy DeVos (@BetsyDeVosED) October 10, 2019