Trump administration fined $100,000 for ignoring court order to forgive debts of defrauded students

The Trump administration’s education department has been fined $100,000 (£78,000) for violating a court order to stop demanding money from student fraud victims.

Betsy DeVos, the education secretary, was held in contempt of court by a federal judge after her department continued to collect loan repayments from former students of a now-defunct college chain.

Thousands of former Corinthian Colleges students filed a lawsuit arguing they had been defrauded by the company before it collapsed in 2015 and were owed full exemption of their federal student loans under a rule created by the Obama administration.

However, in 2017 Ms DeVos announced only partial relief would be offered based on borrowers’ incomes.

In May last year US magistrate Sallie Kim ruled that decision was unlawful and ordered the government to stop collecting loans from former Corinthian students.

This week, the judge said Ms DeVos and the education department had made “only minimal efforts” to comply with the 2018 court order. She ruled that the administration must now file monthly reports to prove it is complying with the order.

The judge wrote there was “no question” the department violated the court order and had “not provided evidence that they were unable to comply with the preliminary injunction".

The education department said it was “disappointed in the court’s ruling” but accepted loan servicers had “made unacceptable mistakes".

The department has previously acknowledged it had incorrectly sent loan bills to more than 16,000 former Corinthian students, prompting more than 3,000 to send payments, and seized wages or tax refunds from 1,800 borrowers.

It also provided credit agencies with negative reports for about 800 borrowers.

Lawyers for the former Corinthian students welcome the ruling as a “rare and powerful action” that brought consequences for the “extreme harm” caused.

“[Ms DeVos] repeatedly and brazenly violated the law to collect for-profit college students’ debts and deny their rights, and today she has been held accountable,” said Toby Merrill, director of the Project on Predatory Student Lending.

“The judge is sending a loud and clear message: Students have rights under the law, and DeVos's illegal and reckless violation of their rights will not be tolerated.”

Ms Kim has threatened to impose further sanctions on the department if it fails to follow the order.

The $100,000 fine will help repay students for expenses they incurred while raising the issue to the court.

Senator Elizabeth Warren, a leading 2020 Democratic presidential candidate, said Ms DeVos should pay the fine instead of US taxpayers having to foot the bill.

“Taxpayers shouldn’t have to pay a heartless billionaire’s court fines for further punishing defrauded students,” Ms Warren said.

“Betsy DeVos should be held personally accountable for violating court orders and breaking the law.”

Additional reporting by AP