Courts suspend DeVos partial student debt relief plan

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Updated with a response from the Ministry of Education.

A federal judge has banned the US Department of Education from using income data to give only partial student loan forgiveness to defrauded borrowers who attended former for-profit Corinthian Colleges chains.

The decision is rooted in Education Secretary Betsy DeVos’ decision in December to provide debt relief to former Corinthian students by comparing the average earnings of students in similar vocational programs. This earnings information is collected through gainful employment, a regulation that penalizes vocational training programs for producing too many graduates with more debt than they can repay.

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The Harvard University Predatory Student Loans Project, a legal services clinic, filed an injunction in March to end the practice. The group argued that the Department of Education does not have the right to use the data, which is provided by the Social Security Administration, for any purpose other than vocational program evaluation. Additionally, lawyers say it is illegal to deny Corinthian students full redress.

In a ruling late Friday, Magistrate Judge Sallie Kim of the U.S. District Court in San Francisco agreed that the Trump administration violated privacy laws by using Social Security Administration data to calculate the rebate. ready. The judge granted the injunction and ordered the Department of Education to end all attempts to collect the Corinthian student loans.

“When the department disclosed to the Social Security Administration information about applicants’ social security numbers and dates of birth from department records, that disclosure violated the Privacy Act” , Kim said in the 38-page decision. She noted that the law provided several specific exceptions that would have permitted the disclosure of such information, none of which apply in this case.

The Department of Education said the use of earnings data is fully consistent with its agreement with the Social Security Administration. Even if the agency is correct, the judge said privacy laws prevent the use of aggregate statistical data to make decisions about the “rights, benefits or privileges of specific individuals”. This creates an obvious conflict with the Department of Education’s use of data to determine how much debt to write off.

“We are encouraged that the court has recognized the secretary’s discretion to establish a borrower defense claims process that determines compensation based on the harm suffered by the borrower,” said Liz Hill, gatekeeper. -word of the Ministry of Education, in an e-mail. “As we implement the Department’s programs, we take into account the requirements of the Privacy Act and will carefully review the court’s decision as we assess next steps.”

The court plans to compel the Department of Education to grant full student loan forgiveness to Corinthian students. A hearing is scheduled for June 4.

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“This ‘Average Earnings Rule’ is not just data theft, but more importantly, it is a factless attempt by the Department of Education to double down on borrowers who were scammed by Corinthian and then waited months, if not years, for the relief the Department promised them,” said Noah Zinner, an attorney with Housing and Economic Rights Advocates, a legal aid group working with the Project on Predatory Student Lending on the case.

It has been three years since Corinthian closed after the Department of Education cut off its access to federal student aid for lying about its graduation and placement rates. At the time, the for-profit chain was being investigated and prosecuted by state and federal authorities for fraud, deceptive marketing, and steering students into predatory loans. Despite the evidence against Corinthian uncovered by the Department of Education, former students are still struggling to get their federal loans fully forgiven.

A federal law known as the Borrower’s Defense of Repayment gives the Department of Education the power to pay off federal student loans when a college uses illegal tactics to persuade students to borrow money. . Demands for debt relief have piled up over the past year, with the Trump administration refusing to act until education officials can fully review procedures instituted under President Barack Obama. .

In December, DeVos announced the approval of 12,900 student loan forgiveness requests and the denial of 8,600 requests from former Corinthian students. She said applicants would receive full loan forgiveness if their income was less than 50% of that of their peers. If their salary is at or above this threshold, the department would provide relief on a sliding scale.

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Critics said the model would create more hardship for people who have been victimized by unscrupulous schools, depriving them of their legal right to full forgiveness of their federal loans.

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