Press Release

Press Release AG Healey Sues Secretary Betsy DeVos for Halting Debt Relief Promised to Defrauded Students

Leads Multistate Lawsuit Against U.S. Department of Education for Failing to Discharge Student Loans, Engaging in Illegal Debt Collection Against Corinthian Students
For immediate release:
12/14/2017
  • Office of Attorney General Maura Healey

Media Contact for AG Healey Sues Secretary Betsy DeVos for Halting Debt Relief Promised to Defrauded Students

Jillian Fennimore

Boston — Massachusetts Attorney General Maura Healey today filed a lawsuit against the U.S. Department of Education and Secretary Betsy DeVos for failing to provide federal loan discharges for students victimized by Corinthian Colleges and subjecting them to wage garnishment and tax refund interception.

The complaint, filed in U.S. District Court in the District of Columbia, alleges that the Department violated federal law by rejecting applications made by AG Healey on behalf of more than 7,000 Massachusetts students who went to the Everest Institute campuses in Boston and Chelsea, part of Corinthian’s now-defunct national chain of predatory for-profit schools. It also alleges that the Department engaged in involuntary debt collection against students covered by AG Healey’s group discharge claim who did not submit individual borrower defense to repayment applications, even though the Department has made findings of fraud against Corinthian.

Finally, the complaint alleges that the administration’s decision not to process even a single one of the 95,000 pending claims since President Trump took office constitutes an illegal delay in violation of students’ rights under federal law. To date, at least 1,000 borrowers in Massachusetts who submitted individual defense to repayment claims are awaiting action by the Department. According to the complaint, even the Department’s Inspector General has called for the Department to begin processing the discharge applications.

AG Healey’s complaint was joined by the Attorneys General of Illinois and New York, and was filed in parallel with a separate lawsuit by the California Attorney General with similar allegations relating to the Department of Education’s unlawful actions.

“Secretary DeVos and her team continue to demonstrate that they would rather give a free pass to predatory schools than give struggling student borrowers the relief they deserve,” AG Healey said. “Today we call on the U.S. Department of Education to begin discharging the loans of students who were cheated and immediately halt their illegal debt collection practices.”

AG Healey contends that it is unlawful for the Department to refuse indefinitely to approve a single claim.

AG Healey’s Office has been at the forefront of efforts to secure relief for the defrauded Corinthian students. In November 2015, the AG’s Office submitted a group discharge application to the Department seeking relief for all students who enrolled at Corinthian’s Everest Institute in Brighton and Chelsea, including 2,700 pages of supporting documentation, and identifying more than 7,000 students entitled to a group discharge. The AG’s Student Loan Assistance Unit also helped 1,350 Corinthian borrowers submit individual applications and held nearly 20 workshops to personally assist them.

In June 2016, the Massachusetts Superior Court found Corinthian liable for violating the Massachusetts Consumer Protection Act. This followed a lawsuit filed by AG Healey against the school in April 2014 for misrepresenting training programs and job placement rates in order to increase profits, along with engaging in high pressure sales tactics that left students with unaffordable student loan debt and without proper training or a career.

Despite this judgment, along with other court judgments obtained by state attorneys general and the Consumer Financial Protection Bureau, the Department refuses to grant discharges to defrauded students and continues to unlawfully collect debt from Corinthian borrowers through wage garnishment and tax refund interception. Corinthian students will never fully recover until the Department begins complying with applicable law.

In June 2017, AG Healey joined 18 attorneys general in demanding that the Department stop delaying loan discharges for students victimized by predatory for-profit schools, including claims that have already been approved.

Today’s complaint follows a multistate lawsuit led by AG Healey in July against Secretary DeVos for abruptly rescinding the Borrower Defense Rule—a regulation that was designed to hold abusive higher education institutions accountable for cheating students and taxpayers. In October, AG Healey also sued Secretary DeVos for refusing to enforce the Gainful Employment Rule, a federal regulation designed to protect students and taxpayers from predatory for-profit schools.

Addressing fraud and abuse in student lending has been a top priority for AG Healey since taking office, whether taking predatory schools to court, changing the practices of student loan servicers, going after unlawful student loan “debt relief” companies, or helping student borrowers find more affordable repayment solutions through her first-in-the-nation Student Loan Assistance Unit. AG Healey has also secured debt relief for students that went to the American Career Institute, reached settlements worth more than $6 million with Kaplan Career Institute, Lincoln Tech, Sullivan & Cogliano, Salter College and DeVry University, filed a lawsuit against ITT Tech, and recently reached a settlement with an unlicensed for-profit nursing school.

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.

This matter is being handled by staff in AG Healey’s Insurance and Financial Services Division, including Tim Hoitink, Glenn Kaplan, Arwen Thoman, Jennifer Snow, Tristan Brown, Drew Tobias, Maggie Wallace, and Matt Frank.

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Media Contact for AG Healey Sues Secretary Betsy DeVos for Halting Debt Relief Promised to Defrauded Students

Office of Attorney General Maura Healey 

Attorney General Maura Healey is the chief lawyer and law enforcement officer of the Commonwealth of Massachusetts.
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