corinthian colleges

Court Orders Department of Education to Consider Student Loan Relief Application, Calling Request for Further Delay “Frivolous and in Bad Faith”

The United States District Court for the Central District of California issued an Order today that directs the Department of Education to rule on the loan relief application of a former Corinthian student that has been pending for over two years.  To date, the Department of Education has not ruled on thousands of applications for loan relief submitted by borrowers whose federal student loans were originated by private banks under the Federal Family Education Loan Program.

The Plaintiff, Sarah Dieffenbacher, filed her first application for loan relief in March 2015. Her loans went into default while her application was still pending.  In late 2016, Sarah received a notice that her wages would be garnished. She works as a home health care phlebotomist to support herself and her four children. She objected to the wage garnishment because the terms of her loan and federal law both provide that Corinthian’s fraudulent actions render her loans unenforceable. She asked the Department to hold the hearing on her objections to which she was entitled.

After the Department of Education overruled her objection, citing the fact that her file included a signed loan contract, and ordered the garnishment to go forward, Sarah filed a lawsuit against the Department in March.  Represented by the Project on Predatory Student Lending of the Legal Services Center of Harvard Law School, she argued that the Department did not consider the arguments or evidence she presented before rejecting her claim. As the Court noted, her application was supported by 254 pages of exhibits, which included a sworn statement from Sarah as well as records from the Attorney General of California regarding documented misconduct on the part of Everest and its parent company.  The Department also did not provide Sarah with the requested hearing before issuing a summary denial.

In response to the lawsuit, the Department filed a motion asking that the Court refrain from examining the case altogether.  The Court ruled that this request was not based on a “substantial or legitimate concern” but rather was “both frivolous and in bad faith,” and “appears to be an attempt to evade judicial review so that it can retain the ability to garnish Plaintiff’s wages without a conclusive ruling as to the enforceability of her loans.”  Under the ruling, the Department now has ninety days to provide Sarah with a conclusive ruling on her application for loan relief.  Responding to the ruling, Sarah said, “I’m fighting for myself, but also for so many others who were defrauded by for-profit schools.  I hope this case will put pressure on the Department to do the right thing.”

This ruling comes amidst growing concern that the Department of Education is refusing to take actions required by law and its own regulations designed to wipe out student loan debts that are the product of fraud and illegal activity by predatory schools.  Tens of thousands of applications for relief based on the fraud of Corinthian and other for-profit schools have been pending with the Department for months and even years.  “Today’s ruling confirms that student loan borrowers have rights that exist independently of political winds and caprices.  It is inexcusable to delay and thereby deny Sarah and other borrowers in similar positions their contractual and statutory rights,” said Toby Merrill, director of the Project on Predatory Student Lending and one of the lawyers representing Sarah.

Additional Information

Ms. Dieffenbacher is also represented by Alec Harris, Eileen Connor, and Deanne Loonin of the Project on Predatory Student Lending of the Legal Services Center of Harvard Law School, as well as Robyn Smith of the Legal Aid Foundation of Los Angeles.

Click here for a copy of the Court’s Order.

Click here for the Project’s press release about the Order.

Project on Predatory Student Lending Attorney Toby Merrill Quoted in Washington Post on Corinthian Student Debt

Last week, one of the country’s biggest career college chains completed its collapse…

But allegations that the company lied about the success of its programs and trapped students in predatory loans ultimately led to its downfall. Now 16,000 students are left without degrees for programs that many took on debt to complete. Hundreds of others are fighting for the government to forgive debt they are struggling to repay…

“It is supremely unfair for the government to hold students feet to the fire on loans that were made to finance what the government should have known were valueless products,” said Toby Merrill, director of the Project on Predatory Student Lending at Harvard Law School.

Danielle Douglas-Gabriel, This for-profit college failed, but its students are left with the wreckage (Washington Post, May 1, 2015)

Project on Predatory Student Lending Releases Poster Explaining Rights and Options of Students Who Attended Closed Everest Schools

Corinthian Poster FINAL.webLSC’s Project on Predatory Student Lending, along with the National Consumer Law Center’s Student Loan Borrower Assistance Project, released a poster showing rights and options of students at the two Massachusetts Everest schools, as well as other Corinthian-owned schools that closed or are in the process of closing.

For-Profit Corinthian Colleges agreed to shut down operations and sell many of its campuses. Prior to that agreement, the Massachusetts Attorney General sued the schools for taking advantage of students with high-pressure and deceptive recruiting, and misleading students about the value of the schools’ services and career preparation and opportunities in order to boost profits at students’ expense.

The shut-down agreement is complicated, and it continues to be difficult for Everest students who struggle with large debts and few employment prospects to figure out their best options. The poster displays options for students at the schools that have closed or will close.  The options for students at schools that continue to operate, either under Corinthian’s ownership or under other ownership, are more limited.

A downloadable pdf of the poster is available here.