Betsy DeVos Draws Judge's Ire for Collecting Scam College Debt
On Monday, lawyers for the U.S. Department of Education went before a federal judge in San Francisco to explain why it continued collecting on the loans of former Corinthian Colleges students despite a court order barring it from doing so. Blasting the government's conduct as "gross negligence" at best and an "intentional flouting" of her order at worst, an incredulous U.S. Magistrate Judge Sallie Kim reminded Secretary of Education Betsy DeVos and company of the penalties that a contempt of court finding might entail. "I’m not sending anyone to jail yet," she said, per Bloomberg, "but it’s good to know I have that ability."
The lawsuit before Judge Kim is part of the fallout from the 2015 implosion of Corinthian Colleges, a sprawling for-profit education empire that declared bankruptcy after a series of federal and state fraud investigations into the company's bogus claims about post-graduation career prospects. Under the Obama administration, the Department of Education responded by implementing a series of rules to protect those on whom Corinthian Colleges had preyed. In light of the company's well-established malfeasance, victims were told they could obtain loan forgiveness and reimbursements of previous payments on an expedited basis, simply by filling out a brief claims form online.
Under Betsy DeVos, however, the federal government has been far more sympathetic to the for-profit education industry. The department quickly began working to roll back efforts to speed up the debt forgiveness process, and created a new, less-generous reimbursement formula that would have granted students only partial relief, leaving them on the hook for the rest of their debt. DeVos justified these steps by arguing that the Obama administration had made it too easy for people to recover from their corporate swindlers. “While students should have protections from predatory practices, schools and taxpayers should also be treated fairly as well,” the billionaire Amway heiress and Republican megadonor said at a conference in 2017. “Under the previous rules, all one had to do was raise his or her hands to be entitled to so-called free money.”
For hundreds of thousands of debt-saddled students who were promised financial relief, DeVos's tenure has meant a long hold-up. In April, the New York Times reported that the department hadn't approved a single applicant for debt relief in the entire second half of 2018, and that more than 150,000 claims were still pending before it. As of June, that number had ballooned to more than 210,000, according to the Washington Post.
Back in 2017, a handful of former Corinthian Colleges students filed a class action lawsuit in an attempt to rescue their claims from DeVos's bureaucratic hell. Earlier this year, Judge Kim issued an injunction ordering the government to stop collecting regular loan payments until the case could be resolved. Yet in a report filed with the court last month—as Bloomberg notes, a report that was supposed to demonstrate compliance with the order—the Department of Education instead revealed that it had since demanded payments of about 16,000 people, and that almost 3,3000 of them had paid money they didn't owe as a result. It also collected from at least 1,808 students by seizing their tax refunds and garnishing their wages.
It seems that the government's excuse, for now, is human error: A lawyer for the Department of Education blamed miscommunications with its loan servicers, and told Judge Kim that the department "takes responsibility" for its failures and would demonstrate "full compliance" with the order going forward. In its court filing, it pledged to fix its mistakes by consulting with its loan servicers and issuing refunds for "any improper wage garnishment or offsets"—a process which, the department says, takes about two or three weeks.
This did not appear to satisfy Judge Kim, who said she was "extremely disturbed" and "really astounded" at the brazenness of the misconduct. "There have to be consequences for the violation of my order 16,000 times," she said at the hearing, according to Politico. Judge Kim has yet to decide whether to hold DeVos or anyone else responsible for this theft in contempt of court, but in light of this news, she decided to lift a stay placed on the case while the department appealed Judge Kim's order to stop its collection efforts—the order it ignored by garnishing defrauded students' wages anyway. "We're going to do everything full speed ahead from this point forward," she said.
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Originally Appeared on GQ
