A federal judge has ruled that Education Secretary Betsy DeVos and the Department of Education are in contempt of court for violating a federal judge’s order on student loans.
The judge had already ordered the Department of Education to stop collecting on loans taken out by student borrowers to attend a for-profit institution that is now defunct. But more than 16,000 borrowers were erroneously told they owed a payment after the court order, and many had those payments garnered from their wages, according to court documents.
U.S. Magistrate Judge Sally Kim ordered the Department of Education to pay $100,000 to a fund for the affected borrowers who attended Corinthian Colleges, Inc.
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“Here, there is no question that defendants violated the preliminary injunction,” the judge wrote. “There is also no question that defendants’ violations harmed individual borrowers who were forced to repay loans either through voluntary actions or involuntary methods (offset from tax refunds and wage garnishment) and who suffered from the adverse credit reporting. Defendants have not provided evidence that they were unable to comply with the preliminary injunction, and the evidence shows only minimal efforts to comply with the preliminary injunction. The court therefore finds defendants in civil contempt.”
Mark Brown, chief operating officer of student federal aid for the Department of Education, said in a video posted to Twitter that the Department of Education is doing everything it can to resolve the situation.
“Unfortunately, loan servicers mistakenly billed approximately 16,000 students and parents,” Brown said. “Although these actions were not done with ill intent, students and parents were affected, and we take full responsibility for that. We have taken swift action to correct the mistake.”
This news comes as top official in the federal student loan program resigned Thursday, calling the system “fundamentally broken” and “insane.” Wayne Johnson, who reported directly to DeVos, also wants billions of existing debt forgiven.
Johnson thinks Washington should follow his lead and quit the federal student loan program.
“Washington needs to be 100% out of the student loan business,” he told CBS News, adding that not only is the system broken, it’s an “insane system.”
Johnson watched student debt keep ballooning with the cost of college. In all, 42 million Americans currently have student debt. The average household owes almost $47,000.
