Vara v. Cardona

In 2015, the Massachusetts Attorney General (AG) filed a group borrower defense application on behalf of approximately 7,200 federal student loan borrowers who attended (or paid for a family member to attend) schools owned by Corinthian Colleges in Massachusetts. The lawsuit demanded that the Department of Education grant the AG’s borrower defense application and cancel the students’ fraudulent loans.

The students won this lawsuit: the judge ordered the Department of Education to cancel the student loans of all 7,200 former Corinthian Colleges students in Massachusetts. This is the first time a federal court has ordered a borrower defense discharge of federal student loans. The ruling is a clear and powerful statement of the rights of student borrowers, and a resounding rejection of the Department of Education’s longtime refusal to recognize these rights and cancel fraudulent student loans.

The victory came nearly two years after students won the related case Williams v. DeVos, and the judge ordered the Department of Education to stop using tax offset to collect borrowers’ loans that were covered by the Massachusetts Attorney General’s borrower defense application.

• October 22, 2019: This case was filed in federal court in Massachusetts

• June 25, 2020: The court issued an order declaring that the AG’s group borrower defense application was valid and requiring the Department of Education to fully discharge the loans of all borrowers named in the application

• August 24, 2020: The Department announced that it would appeal the court’s decision

• July 15, 2021: The Department filed a motion dropping its appeal

• August 10, 2021: The Department formally issued a decision announcing its intention to discharge the loans, provide refunds for amounts paid, and adjust borrowers’ credit scores.

The Project on Predatory Student Lending represents Ms. Vara and approximately 7,200 former Corinthian Colleges students in Massachusetts against the Department of Education. Ms. Vara is a former student of Everest Institute in Massachusetts, a predatory for-profit college owned by Corinthian Colleges. This case was filed after the Department of Education refused to take any action for nearly four years on a group borrower defense application filed by the Massachusetts Attorney General (AG) on behalf of former Everest students.

Not only did the Department of Education ignore the AG's group borrower defense application and refuse to cancel these loans, but it also illegally seized Ms. Vara's federal tax refunds to pay her federal student loans from Everest Institute. Although the government has broad powers to collect defaulted federal student loans, it may not seize funds from borrowers when it knows that the defaulted student loan debts are not legally enforceable due to a school’s fraud. This lawsuit came one year after the Department of Education was ordered to stop collecting on these borrowers’ loans because they were covered by the AG’s application.

• October 22, 2019: Complaint

• November 13, 2019: Motion for Class Certification

• January 16, 2020: Second Amended Complaint

• January 29, 2020: Plaintiffs’ Motion for Judgment

• June 25, 2020: Order Granting Class Certification and Judgment for Plaintiffs

• January 4, 2021: Department of Education’s Appellate Brief

• July 15, 2021: Unopposed Motion for Voluntary Dismissal of Appeal

• August 10, 2021: Department’s Notice of Reasoned Decision on AG Application