In December 2017, the U.S. Department of Education came up with new loan forgiveness standards for students who were defrauded by the for-profit Corinthian Colleges (Everest, Heald, and Wyotech). Under the revamped guidelines, the forgiveness process involved looking at a borrower’s income, as compared to peers, to determine whether the student loan debt should be fully or partially forgiven. To complete this process, the Department of Education used earnings data that the Social Security Administration (SSA) supplied.
The Project on Predatory Student Lending at Harvard University, a legal services clinic, subsequently filed a motion on behalf of several former Corinthian students seeking a preliminary injunction to stop the practice on privacy grounds. The motion also argued that the SSA data could only be used for evaluating vocational programs, not for student loan forgiveness purposes.
On May 25, 2018, Magistrate Judge Sallie Kim of the U.S. District Court for the Northern District of California agreed that the Department of Education violated privacy laws because it shared students’ personal information, including birth dates and Social Security numbers, with the SSA and then used additional SSA information to calculate what percentage of students’ loans to forgive. The judge also ordered the Department of Education to stop attempting to collect student loan payments.
In response, the Department of Education interpreted the order to apply only to the four plaintiffs in the case, not all Corinthian students. So, on June 19, 2018, the judge clarified her ruling and ordered the federal government stop all attempts to collect payments from Corinthian borrowers who:
This reprieve from payments might be temporary though. The judge’s ruling indicates that the Department of Education could be able to partially cancel the students' debts—rather than providing full forgiveness—if it follows a proper and legal procedure.
(Learn more about student loan forgiveness if you attended a Corinthian College.)
Effective date: May 24, 2018