Students Want $100K Contempt Fine Increased For Debt Collection

A federal judge has been asked to increase a $100,000 contempt fine which was ordered against the U.S. Department of Education over failing to comply with an order to cease debt collection from former Corinthian College students.

The former students say new information shows that the department has “never been in compliance” with the court’s order to end the collection of students’ debt, so the $100,000 fine should be increased significantly. 

A class action was filed against the Department from former Corinthian College enrollees, who had borrowed federal loans to pay for their schooling. These students have applied to have their loans cancelled due to borrower defense, the motion claims.

During the prior U.S. administration, the Education Department granted these applications in full, according to the motion. After January 2017, the department ceased granting the applications, and then required former students to repay more than 70 percent of their loans, according to the plaintiffs.

In May 2018, the federal court granted the plaintiffs’ preliminary injunction motion and ordered the defendant to stop all efforts to collect the debts from borrowers who had completed an attestation form, the motion states.

“Defendants were directed to halt any action to collect a loan from the Plaintiffs and other students who attended Corinthian programs at specified times, as identified on published lists,” the students’ motion attests. This motion is currently being appealed to the Ninth Circuit Court of Appeals, who has not yet rendered an opinion.

In July 2019, the plaintiffs told the court that the Department was not complying with the preliminary injunction. Afterward, the defendants submitted a compliance report which showed that the Department sent 16,034 demands to students for payment of their loans.

In August 2019, the parties were at odds as to whether a stay put in place by the judge should be lifted or kept in place.

Thereafter, the motion states that 3,298 students made one or more payments toward their loans. In addition, the defendants sent adverse reports to credit agencies related to 847 students. Last, the defendant had subjected 1,808 students to wage garnishment or tax refund offset, the motion states.

In October 2019, the court entered an order which entitled the defendants to pay compensatory sanctions in the amount of $100,000. 

In the order, the judge stated: “there is 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.”

The motion states that a sanctions fund of $100,000 would award compensation of $1.69 to every student who experienced negative credit reporting, $12.45 to every student who endured involuntary collection, and $4.15 to each student who made voluntary payments.

The plaintiffs are asking for more money because a December compliance report revealed an increase in the number of students who have been affected by the defendants’ noncompliance with the sanctions order, the motion states.

Are you a former student of Corinthian College? Leave a message in the comment section below.

The plaintiffs are represented by Joseph Jaramillo and Natalie Lyons of Housing & Economic Rights Advocates and Eileen M. Connor and Toby R. Merrill of the Legal Services Center of Harvard Law School.

The Corinthian College Student Loan Payment Class Action Lawsuit is Calvillo Manriquez, et al. v. DeVos, et al., Case No. 3:17-cv-07210, in the U.S. District Court for the Northern District of California.

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