The department plans to refund some student loan payments made by thousands of former Corinthian Colleges students after the agency violated a federal judge’s order to stop collecting on the debt amid an ongoing class action lawsuit.
— A federal judge in May 2018 prohibited the department from collecting on the loans of tens of thousands of former students who the agency determined had been defrauded by the now-defunct for-profit college chain — as well as those with pending “borrower defense” claims against the school.
— But the department admitted in a 31-page report filed in court that it had erroneously sought to collect the debts of at least 16,000 borrowers who were supposed to be protected by the order. At least 3,200 of them actually made a payment — or had their wages involuntarily garnished. Those are the borrowers who will receive refunds, the department said.
— The department placed the blame for the errors largely on its contracted loan servicers. Officials singled out FedLoan Servicing, and the department said it was considering punishing the company over “mismanagement” that caused it to violate the court order.