A Federal Judge on Monday sharply Criticized the Education Department and Secretary Betsy DeVos for Violating her Order to Stop Collecting the Student Loans of Tens of Thousands of Borrowers who Attended Corinthian Colleges, the Now-Defunct For-Profit Education Company.
U.S. Magistrate Judge Sallie Kim said in a Hearing she was “extremely disturbed” and “really astounded” that the Department and DeVos had sought to Collect on the Student Loans in Spite of her May 2018 Order to Stop doing so. “Whether it's contempt or whether it's sanctions, I'm going to entertain them,” Kim said during the Hearing, according to an Audio Recording of the Court.
She added: “I'm not sending anyone to jail yet, but it's good to know I have that ability. There have to be some consequences for the violation of my order 16,000 times,” Kim was referring to the Number of Borrowers whose Loans the Department Admitted last month it had Erroneously sought to Collect. Kim also said the Lawsuit would begin Moving Forward again, despite Opposition from the Education Department.
The Department said it is in the Process of Providing Refunds to at least 3,200 of those Borrowers who ended up making Unnecessary Payments. Some of the Borrowers Paid Voluntarily after being Incorrectly told they Owed Money. In other Cases, the Government Erroneously Seized Borrowers’ Federal Tax Refunds or Wages.
The Plaintiffs in the Lawsuit, who are Former Corinthian Students, had asked the Judge last week to Hold the Department and DeVos in Contempt for Violating the Order and Impose Sanctions on them, including Fines.
Kim said on Monday that she was “really disturbed” by what she said was a Lack of Action by the Trump Administration in trying to Comply with the Order. “At best, it is gross negligence, at worst, it’s intentional flouting of my order.” she said.
Kim said she was considering a Range of Options, including Requiring the Department to Better Communicate with Borrowers about the Situation or Hire a Special Master to Oversee the Department’s Management of the Loans.
She said she would order Both the Trump Administration and Plaintiffs to File Briefs about the Issue of Contempt or Sanctions within the Next Several Weeks. “I’m not trying to be punitive, I just want to make sure that the students are helped.” she said.
Charlie Merritt, the Justice Department Attorney who Represents DeVos and the Education Department, said the Agency was “surprised to learn the extent of the non-compliance issues” after Examining them Further over the past several months.
Merritt said that the Department takes “responsibility” and is Committing to bringing itself “into full compliance” with the Court’s Order. The Education Department “definitely has become aware of the need to have better oversight of its servicers going forward,” he said. “It’s been an eye-opening experience.” The Department has Blamed many of its Challenges in following the Judge’s Order on Errors by the Loan Servicing Companies it Hires.
The Order Prohibiting the Education Department from Collecting on Certain Loans owed by Former Corinthian Students is part of a Class-Action Lawsuit over DeVos’ New Policy that provided Only Partial Loan Forgiveness to Some of the Defrauded Borrowers, a Policy that Judge Kim has Halted.
Most of the Case, which is in the Federal District Court in San Francisco, has been On Hold since the Trump Administration Appealed Kim’s Preliminary Ruling to the 9th Circuit Court of Appeals in July 2018.
But on Monday, Kim Granted the Corinthian Students’ Requests to End the Pause in the Case. The Education Department had Opposed Moving Ahead with the Case during the Appeal.
"I'm so concerned about this violation of the order that I think the stay is gone,” Kim said. “And also because the 9th Circuit hasn't ruled, and I'm not going to wait around for them any longer. We're going to do everything full speed ahead from this point forward,” she added.
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