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Education Department Ordered to Forgive Loans

June 29, 2020
 
 

A federal judge has ordered Education Secretary Betsy DeVos to cancel the federal student loan debt of 7,200 Massachusetts students who attended Everest Institute, The Boston Globe reported Friday. Everest was part of Corinthian Colleges' chain of for-profit institutions.

The U.S. district judge ordered the department to approve a 2015 application by Massachusetts attorney general Maura Healey, which originally asked the department to discharge the loans based on allegations of widespread illegal activity and deception by Corinthian.

In 2015, Corinthian went bankrupt and closed all its campuses, and in 2016, the college was ordered by a state Superior Court judge to pay $67 million in restitution for violating the Massachusetts Consumer Protection Act. Despite this, the Department of Education continued to collect on federal loan payments for Corinthian students, which led Healey to sue DeVos for not acknowledging the state's application, resulting in last week's decision.

A statement by Healey last week said this was the first time a federal court had ordered a “borrower-defense discharge” of federal student loans, meaning it is the first time federal loans were ordered canceled on the basis that borrowers were misled or defrauded.

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