7,200 Borrowers Cheated by Corinthian Colleges to Finally Secure Debt Relief as Education Department Drops Legal Appeal | Press Release

U.S. Department of Education Will Comply with June 2020 Court Order to Grant the Massachusetts Attorney General’s Borrower Defense Application

Advocates and Borrowers Urge the Department to Cancel Debts of All Corinthian Colleges Borrowers Due to Company’s Widespread Fraud

BOSTON – Former for-profit college students today secured a long-awaited victory as the U.S. Department of Education filed a motion dropping its appeal in Vara v. Cardona (formerly Vara v. DeVos) and will comply with a federal court order to grant the Massachusetts Attorney General’s borrower defense application on behalf of 7,200 borrowers who attended Massachusetts Everest schools, which were part of the Corinthian Colleges chain. The decision sets the precedent that group borrower defense applications filed by state attorneys general on behalf of defrauded borrowers are valid and must be decided by the Department.

The announcement comes more than one year after a federal judge ordered the Department of Education to grant the Attorney General’s application and cancel the federal student loans borrowed on behalf of all 7,200 former Corinthian Colleges students in Massachusetts. Former Education Secretary Betsy DeVos appealed this ruling and moved to stay the Department’s obligation to discharge the loans. A previous judgment that the Massachusetts Attorney General secured against Corinthian Colleges in state court estimated that class members are owed $67.3 million in restitution.“I’m thrilled that our clients will finally get the long delayed justice they are owed. This outcome is a credit to their perseverance and advocacy over 6 years of fighting and waiting,” said Eileen Connor, Director for the Project on Predatory Student Lending. “However, there remain hundreds of thousands of borrowers who were also defrauded and are equally deserving of action. We urge the Biden-Harris administration to move with urgency to cancel the debts of former Corinthian Colleges students across the nation who are still carrying this debt. We want to thank Attorney General Healey for her commitment to standing up for the students of Massachusetts and we’re thrilled to deliver this victory today.”

The victory in Vara v. Cardona establishes that attorneys general have the ability to invoke the borrower defense process for an entire cohort or group of affected borrowers, relieving borrowers of the burden to submit individual applications that would merely repeat what the attorneys general have already proved to be true. This means the Department now has the authority and obligation to decide any group discharge applications submitted by attorneys general.

“Today is a huge victory for the thousands of former Corinthian students in Massachusetts who were cheated by this destructive school, trapped in unaffordable debt, and then forced to wait years to get the relief they deserve,” said Massachusetts Attorney General Maura Healey. “Our office, alongside the fierce advocates at the Project on Predatory Student Lending, stood by these students and their families from the start and hopes that today’s announcement brings some comfort and helps improve financial stability. We thank the Department for complying with this court order and vow to continue our nation-leading work helping students across Massachusetts with their loans and holding predatory schools accountable for illegal practices.”

“I really had lost hope that this day would ever come. I was 19 with a one-year-old child when Everest Institute scammed me into believing their program would give me and my son the chance for a better future. My son is in high school now,” said Amanda Kulka, a class member in the lawsuit. “For so long this debt has been hanging over me and to finally have that burden lifted will make such a big difference in our life. I hope every person cheated by these schools gets that opportunity and that this is never allowed to happen again.”

“The Project on Predatory Student Lending is calling on the Department of Education to do what is right when it sees evidence of widespread fraud, such as the now defunct Corinthian Colleges chain, and not require individuals to jump through hoops to get their fraudulent loans cancelled,” said Eileen Connor, Director of the Project. “We are contacted everyday by borrowers who attended schools like Corinthian Colleges, ITT, Westwood, and others, who have no idea that the borrower defense process even exists, or find it difficult to impossible to navigate. Others have concluded that it is a process that exists in name only. The Department has the authority to act more broadly than it has today, and it should, in conjunction with the state attorneys general and federal government agencies who were instrumental in uncovering this widespread misconduct.”

As a result of the court’s decision issued in June 2020:

• “Overwhelming” and “uncontradicted” evidence establishes that the plaintiffs and their classmates and families are entitled to cancellation of their loans because of Corinthian’s flagrant and widespread misconduct;

• So that students are no longer caught in “a game of ping-pong,” the Court instructed the agency to take action within 60 days consistent with the court’s order granting relief to all borrowers;

• The Department of Education can’t escape its obligations under the law by simply writing off the loans of people who happen to sue;

• Contrary to the Department’s assertions, a federal court may review the Department’s actions and inactions with respect to borrower defense;

• The Department must act in a consistent and rational manner and must explain its actions;

• “Overwhelming” evidence shows that the Department has, in the past, repeatedly exercised its discretion to cancel federal student loans in response to an application, supported by evidence, from an Attorney General.

 Background: In 2015, the Massachusetts Attorney General asked the Department of Education to immediately cancel the debts of ALL of the approximately 7,200 students who borrowed federal student loans to go to a Corinthian-operated school in Massachusetts because Corinthian’s extensive fraud means that all of them have borrower defenses. She supported her request with thousands of pages of evidence, and a state court found in her favor in a case against Corinthian, ordering the then-bankrupt company to repay every penny that it collected from Massachusetts students. The company never paid a dime, and the Department never gave a definitive response to the application.

In 2016, the Project on Predatory Student Lending filed the lawsuit Williams v. DeVos on behalf of two former Corinthian students whose tax refunds were seized, despite the fact that they were included in the group discharge application. The Department of Education is prohibited from seizing tax refunds to collect debts that are not legally enforceable, and without deciding on the AG’s borrower defense application, the Department was unable to find the plaintiffs’ debts legally enforceable.

In October 2018, the court agreed that the Department had unlawfully collected on these students’ loans, and that students are protected by the Attorney General’s group borrower defense application.

‘In February 2019, at a hearing on compliance with the October order, the Department made clear that it was still not treating the AG’s application as a valid borrower defense application for the 7200+ people, and ignoring the court’s order to make a decision on the application as to the two plaintiffs. The court gave the Department 30 more days to comply. Then the Department voluntarily cancelled the loans of the two plaintiffs, in an attempt to end the case without contending with the AG’s submission.

The Vara v. Cardona lawsuit was filed in federal court in Boston in October 2019, following students’ October 2018 victory in Williams v. DeVos. In June 2020, a federal judge ordered the Department of Education to grant the Attorney General’s application and cancel the federal student loans borrowed on behalf of all 7,200 former Corinthian Colleges students in Massachusetts in the lawsuit. 

About the Project on Predatory Student Lending

Established in 2012, the Project on Predatory Student Lending represents former students of predatory for-profit colleges. Its mission is to litigate to make it legally and financially impossible for federally-funded predatory schools to cheat students. The Project has brought a wide variety of cases on behalf of former students of for-profit colleges. It has sued the federal Department of Education for its failures to meet its legal obligation to police this industry and stop the perpetration and collection of fraudulent student loan debt. ###