Secretary of Education Betsy DeVos was held in civil contempt and sanctioned Thursday evening by a federal judge who ruled the Department of Education’s collections on student loan debts from thousands of borrowers who were defrauded by for-profit colleges were illegal.
The finding is part of a class action lawsuit filed by Harvard University’s Project on Predatory Student Lending. In the ruling, Magistrate Judge Sallie Kim of the U.S. District Court in San Francisco found that the Department of Education failed to show any reason that it should not be held in contempt. The judge fined the department $100,000 and ordered monthly reporting updates.
“There is no question that Defendants violated the preliminary injunction,” she wrote in the ruling , referring to “defendants” DeVos and the Education Department. “There is also no question that Defendants’ violations harmed individual borrowers who were forced to repay loans either through voluntary actions or involuntary methods (offset from tax refunds and wage garnishment) and who suffered from the adverse credit reporting.”
“Defendants have not provided evidence that they were unable to comply with the preliminary injunction, and the evidence shows only minimal efforts to comply with the preliminary injunction,” she continued. “The Court therefore finds Defendants in civil contempt.”
The ruling follows a case management conference held earlier this month at which the judge addressed a Sept. 18 filing by DeVos that showed the department had continued to collect on the debt of thousands of former Corinthian Colleges students in direct violation of the court’s previous injunction ordering it not to collect on those debts.
“Taking this rare and powerful action to hold the Secretary of Education in contempt of court shows the extreme harm Betsy DeVos’ actions have caused students defrauded by for-profit colleges,” Toby Merrill, director of the Project on Predatory Student Lending, said in a statement.
According to the filing, the department demanded incorrect loan payment from 16,034 students. Of those, 3,289 borrowers made one or more loan payments, which they were not actually supposed to pay, and 1,808 had their wages, tax refunds or other benefits garnished. The department has still not confirmed that 1,147 students’ loans are in the correct status.
“Thousands of students illegally had their tax refunds seized and wages garnished, and the Department still can’t identify all of the affected students nor refunded the money,” Merrill said. “The judge is sending a loud and clear message: students have rights under the law and DeVos’ illegal and reckless violation of their rights will not be tolerated.”
In the ruling, the judge noted that DeVos expressed regret about the situation through her counsel.
“We did not meet our own standard,” Mark Brown, chief operating officer at the Department of Education’s Federal Student Aid office, said in a message posted to Twitter on Thursday, adding that the loan servicers mistakenly billed the borrowers.
“Although these actions were not done with ill intent, students and parents were affected and we take full responsibility for that,” Brown said. He said department officials are taking steps internally to fix the situation and that 99% of borrowers who made payments when they didn’t need to have been refunded.
The ruling comes on the heels of the Project on Predatory Student Lending filing a lawsuit Tuesday against DeVos on behalf of approximately 7,200 former students enrolled in now-defunct for-profit schools in Massachusetts operated by Corinthian Colleges, demanding department officials cancel their student loans.
Another lawsuit also filed Tuesday, this one in U.S. District Court for the District of Columbia by National Student Legal Defense Network, alleges that the Education Department allowed a different operator of for-profit colleges to mislead students and “caused students at the schools to borrow money and waste months of their lives in pursuit of an education they did not know was unaccredited.”
The lawsuits were filed the same day House Democrats threatened to subpoena DeVos for obstructing their investigation into the department’s role into how it allowed that operator of for-profit schools, Dream Center Education Holdings, to continue enrolling students and bank tens of millions of dollars in federal student aid despite losing their accreditation.
A Democratic committee aide said DeVos and her department’s handling of for-profit operators is an ongoing issue for oversight for the House Education and Labor Committee and it plans to hold hearings on the issue in November.

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