Betsy DeVos Fined Over Student Debt Processing

U.S. Secretary of Education Betsy DeVos and the Department of Education have been held in civil contempt by a federal judge and hit with a $100,000 fine for violating the judge’s order. The judge had granted a preliminary injunction in May 2018 ordering the department to stop collecting on the debts of former students at bankrupt Corinthian Colleges Inc. Despite the order, the department went as far as seizing the students’ tax refunds and wages.

U.S. Magistrate Judge Sallie Kim in San Francisco ordered the $100,000 to go to a fund held by the students’ lawyers. The former students of the now-defunct Corinthian Colleges are being represented by lawyers at the Project on Predatory Student Lending and Housing and Economic Rights Advocate. Both sides must submit a plan for administering the fund by Nov. 15.

Corinthian, once among the nation’s largest for-profit college chains, collapsed in 2015 after it faced a flood of government investigations and lawsuits alleging systemic fraud. Thousands of students were left without a degree and saddled with student debt. The federal government declared that as many as 335,000 former students could void their debt and prompt a refund on past payments by checking a box and signing their names on a simple form.

A report the department filed last month to show its compliance with the judge’s order showed that more than 16,000 borrowers were incorrectly informed that they owed a payment on their debt after the court order. At least 1,808 people had their wages garnisheed and more than 800 were subject to adverse credit reporting because of the department’s action. At a hearing held on Oct. 7, Kim said she was “astounded” by the Education Department’s conduct, referring to it as “gross negligence” at best and “an intentional flouting” of her order at worst.

Mark Brown, the chief operating officer of the department’s office of Federal Student Aid said that 99 percent of those who made payments when they didn’t need to or had their wages garnisheed have been refunded. Those who haven’t yet been dealt with will be refunded by the end of the week.