Education Department ordered to halt loan collection from defrauded students

By Daniel Uria  |  June 20, 2018 at 6:01 PM
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June 20 (UPI) -- A federal judge in California ordered the Department of Education to stop collecting student loan debts from students who were defrauded by Corinthian Colleges.

Magistrate Judge Sallie Kim of the U.S. District Court in San Francisco issued an order Tuesday to ban the Education Department from using earnings data to grant or deny partial student loan forgiveness to Corinthian students and block the collection of their federal debts.

The court ruled in May that the Department of Education violated privacy laws by using Social Security Administration information to determine the amount of debt relief to grant Corinthian students and the agency interpreted the ruling applied only to four students identified as plaintiffs in the case. Kim's order Tuesday clarified the ruling extended to all Corinthian borrowers.

Harvard University's Project on Predatory Student Lending filed motion for an injunction in March to block Education Secretary Betsy DeVos and the Department of Education from using "gainful employment" metrics provided by the Social Security Administration to partially deny student loan relief.

"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, director of the Project on Predatory Student Lending.

Kim said the order will stay in place until the court can determine a proper course of action for relieving the debt, but doesn't prevent DeVos from granting full relief to Corinthian students in the interim.

Under guidelines announced in December, the department offered students earning 49 percent or less of what their peers earn 100 percent relief on their loans and students at or above that threshold would be offered relief on a sliding scale.

At the time the Department of Education said it approved discharge of 12,900 pending claims submitted by former Corinthian students, while 8,600 pending claims had been denied.

Court filings noted 9,000 Corinthian borrowers were awarded partial relief as of April.

"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," Merrill said. "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."

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