Department of Education held in contempt for continuing to collect certain student loans

Courts Student Lending Department of Education

On October 24, a magistrate judge for the U.S. District Court for the Northern District of California held the Department of Education and Secretary Betsy DeVos in civil contempt and ordered them to pay $100,000 in sanctions for violating a May 2018 preliminary injunction that prohibited them from collecting on student loans used for programs at a now defunct for-profit college (previously covered by InfoBytes here). According to the October 24 order, the defendants allegedly showed “only minimal efforts to comply with the preliminary injunction.” Moreover, a compliance report filed in September was “silent as to the normal actions one would expect from an entity facing a binding court order: multiple in-person meetings or telephone calls to explain the preliminary injunction and to confirm that the contractors were complying with the preliminary injunction.” The court further stated that the defendants acknowledged in their compliance report, among other things, that (i) more than 16,000 former student were told they had payments due on their student loans after the court-ordered prohibition went into effect in May 2018; (ii) nearly 3,300 of the borrowers made one or more payments; and (iii) more than 1,800 other borrowers had wages or tax returns garnished to collect on unpaid student loans. In addition to the finding of contempt and the monetary penalty, the defendants are required to file monthly status reports on their compliance with the injunction and “submit a revised notice to be sent to the entire potential class regarding [d]efendants’ noncompliance with the preliminary injunction and their forthcoming efforts to fully comply.”