A federal judge awarded Corinthian College students a small victory when he ordered the Department of Education to stop collecting payments.
Last week, a federal judge ordered the U.S. Department of Education to stop collecting student loan payments from former Corinthian Colleges students. This was a small victory for the students who are trying to get their federal loan debt forgiven – a protracted debate for some time.
In December, Education Secretary Betsy DeVos agreed to grant partial loan forgiveness to students who attended the defunct for-profit school after some legal proceedings. DeVos said she would grant forgiveness based on the average earnings of students that attended similar vocational programs.
In March, the Project on Predatory Student Lending, a legal services clinic at Harvard University, filed an injunction against the Department of Education. They argued that the department was violating the federal Privacy Act by disclosing the applicants’ personal information to the Social Security Administration, USA Today reported.
U.S. Magistrate Judge Sallie Kim granted the temporary injunction, agreeing that the department failed to follow proper procedure.
Corinthian Colleges closed three years ago after the department cut off the school’s access to federal financial aid. Their sudden closing left tens of thousands of students saddled with student loan debt and with limited options for finishing their degrees.
The for-profit chain has been accused of misleading students about the quality of its programs and their job placement rates. It has also been investigated for using deceptive marketing tactics to lure students into joining their programs.
During the Obama Administration, over 25,000 Corinthian students had their loans discharged through a new proposal. But in December 2017, DeVos announced that the department would establish new procedures for granting loan forgiveness. The new system would compare the programs the students attended and determine whether those students were able to earn as much as their peers who attended similar programs.
After reviewing the data, the department announced that 51 Corinthian programs passed the gainful employment guidelines, while only six failed.
According to the lawsuit, this change in procedure impacted thousands of former Corinthian borrowers, many who are struggling financially. Attorneys for the students argued that all former Corinthian students deserve full loan forgiveness.
Liz Hill, a spokeswoman for the Department of Education, responded to the ruling in an email to The Washington Post and said, “In implementing the Department’s programs, we are mindful of the Privacy Act’s requirements, and we will carefully review the court’s decision as we assess next steps.”
The department was encouraged to learn that the judge ruled that Secretary DeVos has the authority to grant partial loan forgiveness if proper procedure is followed, according to USA Today.
The judge added that she was concerned that there didn’t appear to be any clear process used to grant loan forgiveness under the Obama Administration. The court scheduled a follow-up hearing for June 4 to address the issue further.
In general, student loan forgiveness is a tricky topic. It’s an enticing prospect, but in reality, it is out of reach for the majority of student loan borrowers in the United States. Reading up on it is key; check out our forgiveness guide hyperlinked above.