Press Release  AG Healey Celebrates Court Decision Ordering Secretary Devos to Cancel Federal Loans of Defrauded Corinthian Students in Massachusetts

Boston — Attorney General Maura Healey issued the following statement in response to a decision today by a federal judge in Boston ordering the U.S. Department of Education and Education Secretary Betsy DeVos to cancel the loans of 7,200 students in Massachusetts who were defrauded by Corinthian Colleges.

Today’s victory in the case Vara v. DeVos will result in millions of dollars in student loan relief and is the first time a federal court has ordered a borrower defense discharge of federal student loans.

“Thousands of Massachusetts students cheated by Corinthian have finally had their day in court, and they have won,” said AG Healey. “This landmark victory for students will cancel the federal loans for thousands of defrauded borrowers, mostly Black and Latinx students, targeted by a predatory for-profit school and abandoned by Secretary DeVos and the Trump Administration. For five years, our office and the Project on Predatory Student Lending have fought to win students the relief they deserve and today we have won decisively.”

“This ruling is a clear and powerful statement of the rights of student borrowers, and a resounding rejection of the Department of Education’s ongoing and across-the-board refusal to recognize these rights and cancel fraudulent student loans. Our clients, and all 7,200 Massachusetts students who were cheated by Corinthian and have been waiting nearly five years for the Department of Education to acknowledge their right to loan cancellation,” said Project on Predatory Student Lending Director Toby Merrill.  “We thank Attorney General Healey for her long-term commitment to fighting for these borrowers, and look forward to the day when five-year, three-lawsuit battles to cancel obviously fraudulent debts are not necessary.”

BACKGROUND: 

The AG’s Office has established itself as a national leader on behalf of distressed student borrowers, committed to challenging the callous and illegal policies of Secretary DeVos and the U.S. Department of Education.

In October 2019, AG Healey sued Secretary Devos to hold the Department of Education accountable for illegally failing to discharge the loans of all 7,200 defrauded students that attended Corinthian College in Massachusetts. The Department had failed to consider a group application submitted in 2015 by the AG’s Office on behalf of the students seeking cancellation of the federal student loan debt incurred by students who went to the Everest Institute’s Massachusetts campuses, part of Corinthian’s defunct national chain of for-profit schools. AG Healey’s group application included more than 2,700 pages of supporting documentation about the school’s widespread illegal conduct and deception of student borrowers.

This application was based on AG Healey’s extensive investigation of Corinthian’s misconduct and lawsuit in 2014 against the school, after which AG Healey filed an enforcement action that resulted in a judgment that the school had violated the Massachusetts Consumer Protection Act.

Today’s decision follows the Project on Predatory Student Lending’s case, Williams v. DeVos, in which a federal judge ruled in 2018 that the Department of Education had illegally taken the tax refunds of the plaintiff-students without addressing the AG’s assertion that their loans are fraudulent and unenforceable. Like the Commonwealth, the subsequent Vara v. DeVos lawsuit also demanded that the Department grant the AG’s borrower defense application and cancel the fraudulent loans of all Corinthian students in Massachusetts.

Despite the federal court order in October 2018, finding that AG Healey’s submission was a valid group discharge application, the Department has refused to acknowledge the state’s application and continued to collect on these loans, including by seizing student tax refunds and garnishing wages. Former Corinthian students had delinquent or defaulted federal loans listed on their credit reports, had their financial and educational opportunities negatively affected, and have been limited in their ability to obtain employment and housing.

Massachusetts borrowers who are looking for student loan help or information should visit the AG’s Student Loan Assistance page or call the Student Loan Assistance Unit Hotline at 1-888-830-6277.

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