Corinthian students maintained that they were lured to attend the school by the college chain's job placement rates, which turned out to be inflated. Initially, DOE granted full relief to some claimants.
In 2017, however, DOE unilaterally changed the way it processed these claims and only granted partial relief from student loans under a formula that calculated the income of borrowers who had been enrolled in Corinthian programs. A group of former Corinthian students sued DOE for arbitrarily changing the rules and Judge Sallie Kim certified the lawsuit as a class action.
Judge
Sallie Kim issues a preliminary injunction against DOE
While this litigation was ongoing, Judge Kim issued
a preliminary injunction against DOE, ordering the agency to “cease all efforts
to collect debts from Plaintiffs” (Calvillo Manriquez v. DeVos, p. 538). Corinthian appealed Judge Kim’s
preliminary injunction to the Ninth Circuit Court of Appeals, and Judge Kim
stayed all proceedings while the appeal was pending.
Later, the student plaintiffs filed a motion asking
Judge Kim to lift the stay and enforce her injunction. Judge Kim then ordered
DOE to file a report regarding the status of its compliance with her injunctive
order.
DOE filed a “Compliance Report,” in September 2019,
admitting that it had erroneously sent a notice to 16,034 borrowers that
student-loan payments were due. In response to that notice, more than 3,000
borrowers made one or more payments on their student loans.
According to Judge Kim, DOE did not notify any of
the borrowers that it had made a mistake and did not issue refunds to borrowers
who had made payments in violation of the preliminary injunction. (p.538)
Moreover, in violation of Judge Kim’s injunctive
order, DOE “provided adverse reports to credit reporting agencies for 847
Corinthian borrowers and collected on the loans of 1,808 Corinthian borrowers
through wage garnishment or offsets from tax refund[s].” (pp. 538-39).
Judge
Kim finds DOE in contempt of her preliminary injunction
After hearing the evidence, Judge Kim held DOE in
contempt. In her order, the judge wrote:
[T]here is no question that [DOE] violated the preliminary injunction. There is also no question that [DOE’s] violations harmed individual borrowers who were forced to repay loans either through voluntary action 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. The Court therefore finds Defendants in civil contempt. (p. 540)
Judge
Kim then fined DOE $100,000.
The Court finds that a monetary sanction of $100,000 paid by [DOE], to a fund held by Plaintiffs’ counsel, is the best method to remedy [DOE’s] wrongful acts. Given that there are over 16,000 borrowers who have suffered damages from [DOE’s] violation of the preliminary injunction and given that there may be some administrative expenses to remedy the harm, the Court finds the amount reasonable. (p. 540)
Conclusion
Calvillo Manriquez v. DeVos
is simply one more sign that the U.S. Department of Education holds distressed
student debtors in contempt and Judge Kim’s contempt order was certainly
appropriate.
Nevertheless,
the $100,000 fine that Judge Kim issued against DOE is totally inadequate to
get DOE’s attention. A $100,000 fine is
just pocket change to DOE Secretary Betsy DeVos—probably less than the annual maintenance
costs on her yacht. And $100,000
distributed to the 16,000 Corinthian students who were injured by DOE’s conduct
amounts to only about eight bucks apiece.
Corinthian
Colleges filed for bankruptcy nearly five years ago, and some of the plaintiffs
were injured earlier than that. Five years is too long to wait for justice. The
Department of Education should be ordered to forgive all student-loan debt
acquired by students who attended for-profit colleges that have been found guilty of
fraud and deception. In other words,
all the poor souls who attended Corinthian Colleges should have their student
loans forgiven in their entirety.
References
Calvillo Manriquez v. DeVos, 411 F. Supp. 3d 535 (N.D. Cal. 2019).
Calvillo Manriquez v. DeVos, 411 F. Supp. 3d 535 (N.D. Cal. 2019).
![]() |
The Seaquest: Betsy DeVos's yacht |