Press Release  AG Healey Sues Secretary Devos for Failing to Act on State’s Application for Student Loan Relief

BOSTON — Attorney General Maura Healey today sued Education Secretary Betsy Devos to hold the U.S. Department of Education accountable for illegally failing to discharge the loans of all 7,200 defrauded students that attended Corinthian College in Massachusetts. The lawsuit seeks millions of dollars in debt relief for these students.

According to the complaint filed today in U.S. District Court, the Department has 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 now-defunct national chain of for-profit schools. AG Healey based the group application on the state’s successful lawsuit against Corinthian, which included a judgment that the school had violated the Massachusetts Consumer Protection Act and included more than 2,700 pages of supporting documentation about the school’s widespread illegal conduct and deception of student borrowers.

“Even when presented with irrefutable evidence of fraud and deception by Corinthian, Secretary Devos continues to side with her allies in the predatory for-profit school industry, rather than follow federal law and provide our students with the relief they need to rebuild their lives,” AG Healey said. “Together with The Project on Predatory Student Lending, we are suing to force the Department to do its job and cancel these loans.”

Despite a 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 continues to collect on these loans, including by seizing student tax refunds and garnishing wages. Former Corinthian students continue to have delinquent or defaulted federal loans listed on their credit reports.

Alongside AG Healey’s lawsuit, The Project on Predatory Student Lending today filed a related case, Vara v. Devos, in federal court on behalf of the same students. Today’s cases follow the Project’s 2018 case, Williams v. DeVos, in which a federal judge ruled 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 Vara v. DeVos lawsuit also demands that the Department grant the AG’s borrower defense application and cancel the fraudulent loans of all Corinthian students in Massachusetts.

“The evidence of abuse is indisputable. The only possible action to take is complete loan cancellation for all former Corinthian students of Massachusetts,” said Project on Predatory Student Lending Director Toby Merrill. “We will work with Attorney General Healey to force Betsy DeVos to follow the law and cancel the debts of 7,200 defrauded Corinthian students who were cheated and continue to suffer under the weight of these fraudulent debts. We thank Attorney General Healey for her commitment to holding Betsy DeVos accountable and for her dedication to standing up for students until these Corinthian loans are cancelled once and for all.”

According to the AG’s lawsuit, the Department’s actions have negatively affected borrowers’ financial and educational opportunities, limiting their ability to obtain employment and housing and constraining their ability to continue their education.

Today’s lawsuit alleges the Department’s continued refusal to discharge the loans constitutes a constructive denial of the group application and is arbitrary and capricious in violation of the Administrative Procedures Act.

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 Department.

In 2017, AG Healey persuaded the Department to take unprecedented action in granting a group discharge – valued at nearly $30 million – to all American Career Institute borrowers on the basis of school misconduct. Later that year, AG Healey sued Secretary DeVos for failing to provide federal loan discharges for students victimized by Corinthian and subjecting them to wage garnishment and tax refund interception. In June 2017, AG Healey demanded that the Department stop delaying loan discharges for students victimized by predatory for-profit schools, including claims that have already been approved. In October 2017, AG Healey sued to protect the Gainful Employment Rule, a federal regulation designed to protect students and taxpayers from predatory for-profit schools. The office has also urged the Department to rescind its proposed regulations that give a free pass to predatory schools hoping to cheat their own students.

In a multistate effort led by AG Healey to save critical student loan protections, a federal judge rejected a challenge to the Borrower Defense Rule in October 2018, ordering its immediate implementation for students nationwide. This implementation resulted in approximately $381 million in automatic loan discharges for students whose schools closed on or after November 1, 2013 before they could complete their degrees and who did not re-enroll in another school within three years.

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 Assistant Attorney General Yael Shavit of the AG’s Consumer Protection Division and Assistant Attorney General Diana Hooley of the AG’s Insurance and Financial Services Division with assistance from Arwen Thoman, Deputy Director of the Insurance and Financial Services Division and head of the AG’s Student Loan Assistance Unit.

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