Plaintiffs move the Court for a preliminary injunction returning to the status quo ante by requiring the Department of Education
FACTUAL BACKGROUND
A. Regulatory Background.
The Department of Education (the "Department") is responsible for overseeing and implementing Title IV of the Higher Education Act of 1965 ("Higher Education Act")
In 1995, the Secretary promulgated a regulation that permits a borrower to assert as a defense to repayment, "any act or omission of the school attended by the student that would give rise to a cause of action against the school under applicable State law."
If the borrower's defense against repayment is successful, the Secretary notifies the borrower that the borrower is relieved of the obligation to repay all or part of the loan and associated costs and fees that the borrower would otherwise be obligated to pay. The Secretary affords the borrower such further relief as the Secretary determines is appropriate under the circumstances. Further relief may include, but is not limited to, the following:
(i) Reimbursing the borrower for amounts paid toward the loan voluntarily or through enforced collection;
(ii) Determining that the borrower is not in default on the loan and is eligible to receive assistance under title IV of the Act.
(iii) Updating reports to consumer reporting agencies to which the Secretary previously made adverse credit reports with regard to the borrower's Direct Loan.
The loans that are the subject of this litigation were issued pursuant to a Master Promissory Note, which states that the borrower may assert a defense against collection of the loan, if "the school did something wrong or failed to do something that it should have done," provided that "the school's act or omission directly relates to [the] loan or the educational services that the loan was intended to pay for, and if what the school did or did not do what would give rise to a legal cause of action against the school under applicable state law." (Dkt. 35-5, at ¶ 3, Ex. 1, at page 7.)
A memorandum from James Runcie, the Chief Operating Officer of the Federal Student Aid office of the Department, dated June 4, 2015, states: "Prior to 2015, the borrower defense identified above was
B. Corinthian Colleges.
Corinthian Colleges, Inc. ("Corinthian") was a for-profit college chain, operating under the brands Everest, Heald, and WyoTech. (Dkt. 35-5, Ex. 2, at page 1.) At its peak in 2009 and 2010, Corinthian operated over 100 campuses in 25 states, enrolled over 110,000 students and collected over $1.7 billion in revenue, over 80% of which was in the form of student loans provided under the Direct Loan Program. (Id. , at page 2.) The Corinthian schools included different campuses for a wide variety of subjects. For example, Corinthian schools included Heald Concord - Accounting, Heald Fresno - IT Network Systems, Everest Los Angeles Wilshire - Dental Assistant (Diploma), and WyoTech Long Beach - Plumbing Technology (Diploma). (Dkt. 35-6, Exs. 6-7.)
In January 2014, the Department sought data supporting Corinthian's advertised job placement rates. (Dkt. 35-7, Ex. 11, at page 4.) Corinthian refused to provide the data, and in June 2014, the Secretary placed Corinthian on a heighted cash monitoring status. (Id. ) In July 2014, the Secretary and Corinthian entered into an operating agreement, pursuant to which Corinthian would cease operations "by teaching out at least a dozen of its campuses and by selling as many of the rest of the schools as possible." (Id. ) The Secretary also appointed a monitor to oversee Corinthian's operations and its wind-down activities, "including federal student aid draws, expenditures (including refunds required under the operating agreement), and [Corinthian's] compliance with its obligations to thе Department." (Id. )
In March 2015, after Corinthian failed to file audited financial statements, the Secretary requested a letter of credit from Corinthian. (Id. , at page 5.) In April 2015, the Secretary determined that Corinthian made false statements about its placement rates and issued a fine against Corinthian in the sum of $30 million for "substantial misrepresentation" under 34 C.F.R.§ 668.71 - 75. (Dkt. 35-5, Exs. 3-4; Dkt. 35-7, Ex. 11.) Specifically, the Secretary found that Corinthian published falsely inflated job placement rates for 947 programs at its Heald College locations. (Dkt. 35-5, Ex. 3.)
Corinthian closed its colleges in April 2015, and students who had borrowed federal student loans to attend a Corinthian program asserted their rights to cancellation of their loans under the borrower defense rule and terms of the Master Promissory Notes. (Dkt. 35-5, Ex. 5, at pages 2-3.)
C. The Secretary's Response to the Collapse of Corinthian.
Faced with the collapse of Corinthian and over 100,000 borrowers with potential borrower defenses, Under Secretary Ted Mitchell ("Under Secretary") of the Department appointed a special master ("Special Master") to help the Department develop the processes and systems needed to provide relief to borrowers who had relied upon false and misleading statements from certain career colleges, including Corinthian. (Dkt. 35-7, Ex. 11, at page 1.) The goal of the Special Master was to develop a system for providing debt relief that was "fair, transparent, and efficient, with a minimal burden on borrowers." (Id. )
In the case of a borrower who attended a Heald program on the Lists, the attestation form states as follows:
I am submitting this attestation and additional materials in support of my application for a borrower defense to repayment discharge of my Direct Loans under34 C.F.R. § 685.206 (c)
....
I believed that the job placement rates related to my program of study indicated the level of quality a Heald education offered to students. I chose to enroll at Heald based, in substantial part, on the information I received about job placement rates related to my program of study and the quality of education I believed those placement ratеs represented.
(Dkt. 35-6, Ex. 8.) The combined attestation form for the Everest and WyoTech programs is identical to the attestation form for the Heald program attestation form but substitutes the names of Everest and WyoTech for Heald. (Dkt. 35-6, Ex. 9.)
On March 26, 2016, the Special Master reported that he had reviewed 546 claims from borrowers and recommended to the Under Secretary that "full relief (including restitution of all amounts paid) be provided for [certain] loans." (Dkt. 35-7, Ex. 13, at page 5.) Such loans included programs at Heald, Everest, and WyoTech. (Id. )
D. The Department's Actions in Relieving Debt before January 20, 2017.
The Department reached out to borrowers who were potentially eligible for discharge of their loans under the borrower defense rule by electronic mail and postal mail. (Dkt. 35-7, Ex. 15, at pages 5-6.) The outreach was to 280,000 Everest and WyoTech students and over 55,000 Heald students. (Id. ) The Department received 72,877 claims between June 25, 2015 and January 20, 2017 and reviewed and discharged 26,964 claims. (Dkt. 35-6, Ex. 10, at page 6.)
In October 2016, in response to the claims resulting from the collapse of the Corinthian colleges, the Secretary announced the final regulations, which were
any act or omission of the school ... that would give rise to a cause of action against the school under applicable State law, and includes one or both of the following:
(i) A defense to repayment of amounts owed to the Secretary on a Direct Loan, in whole or in part.
(ii) A claim to recover amounts previously collected by the Secretary on the Direct Loan in whole or in part.
Plaintiffs claim that, before January 20, 2017, there was a "Corinthian Job Placement Rate Rule" (the "Corinthian Rule").
(1) California is the applicable state law for purposes of determining whether there is a cause of action against the specific Corinthian school under34 C.F.R. § 685.206 (c)(1) ;
(2) Corinthian misrepresented its job placement rates at specified campuses, regarding certain programs, during enumerated periods of time;
(3) Any Corinthian borrower who submits a simple attestation form provided by the Department or otherwise submits sufficient information to establish a membership in a certain group establishes a borrower defense; and
(4) The Department will provide relief under California law by cancelling all outstanding amounts on related loans and returning any money collected by the Department. (Dkt. 35, at pages 12-13.) According to Plaintiffs, the Corinthian Rule covers 800 Heald programs between 2010-2015, for the benefit of at least 50,000 borrowers, and 800 Everest and WyoTech programs in over twenty states, with 85,000 borrowers who are eligible for cancellation under the borrower defense rule. (Id. , at page 14.)
Plaintiffs contend that the Corinthian Rule was "codified" in three documents: (1) a memorandum prepared by the Department's Office of General Counsel, (2) a fine action letter prepared by Federal Student Aid's Administrative Actions & Appeals Service Group, and (3) an April 2015 document prepared by the Federal Student Aid's Administrative Actions & Appeals Services Group. (Dkt. 35, at pages 13-14 (citing Dkt. 35-6, Ex. 10); Dkt. 58 (First Amended Complaint), at ¶ 80.) In addition, Plaintiffs claim that the Department issued consistent public statements about the existence of the Corinthian Rule. (Dkt. 35, at pages 13-14 (citing Dkt. 35-7, Ex. 11).)
There is one area of agreement. Plaintiffs and the Secretary agree that, if borrowers signed the attestation forms to show that they had attended the schools on the Lists and that they had relied upon the false statements, the Department did not require them to prove on an individual basis that thеy were defrauded. (Dkt. 35-5, Ex. 5, at pages 2-3; Dkt. 42, at pages 6-7.) Instead of proving their claims individually, those borrowers could assert their right to relief as part of an expedited system. (Id. )
However, the Secretary challenges the existence of the Corinthian Rule. The Secretary states that there was no rule that guaranteed full relief to any borrower who completed the attestation form. The Secretary claims that the Department "maintained its discretion to ... discharge 'all or part' of a loan subject to a successful borrower claim." (Dkt. 42, at page 1.) The Secretary argues that the Department never represented to borrowers that they would be entitled to full relief if they completed the attestation forms.
"Loan forgiveness" on the attestation forms does not specify the amount of forgiveness of the debt. (Dkt. 35-6, Exs. 8, 9; Dkt. 42, at page 7.) None of the documents that Plaintiffs cite state that borrowers are entitled to full relief even if they attended a program on the Lists and completed the attestation form. As a practical matter, though, it appears that, before January 20, 2017, the Department did provide full relief or total discharges for borrowers who completed the attestation forms. The Secretary does not challenge or refute that factual statement.
E. The Department's Actions as of January 20, 2017.
Starting on January 20, 2017, the Secretary stopped processing claims under the Corinthian Rule. (Dkt. 35-6, Ex. 10, at pages 3, 13-14.)
1. Delay of Previous Regulations.
In June 2017, the Secretary announced that she was undertaking further rulemaking on the issue of the borrower defense rule and delayed the regulations that were set to become effective July 1, 2017, discussed above. (Dkt. 35-7, Ex. 18.) One news article reported that the Secretary remarked: "Under the prеvious rules, all one had to do was raise his or her hands [sic] to be entitled to so-called free money." (Dkt. 35-8, Ex. 32.)
a. Preliminary Assessment Using "Gainful Employment" Metric.
The Secretary first reviewed a metric of "gainful employment" for Corinthian schools and determined that some students who attended Corinthian schools obtained some educational benefit. The metric of "gainful employment" assesses whether a program "has indeed prepared students to earn enough to repay their loans, or was sufficiently low cost, such that students are not unduly burdened with debt, and to safeguard the Federal investment in" Title IV.
b. December 15, 2017 Memorandum and December 20, 2017 Press Release.
The Secretary claims that the Department quantified the lack of value actually received from the educational program attended "by comparing the average earnings of students who attended a given academic program with the average earnings of similar programs аt schools the Department determined adequately prepared students for gainful employment." (Dkt. 42, at page 2.) The Secretary issued a memorandum, dated December 15, 2017, authored by the Senior Advisor to the Office of the Chief Financial Officer of the Department "in collaboration with FSA [Federal Student Aid office] and the Department's Office of the General Counsel" (the "December 15, 2017 Memorandum"). (Dkt. 42-2, at ¶¶ 2, 6 and Ex. 1.) The December 15, 2017 Memorandum details the steps that the Department took in determining the new methodology for relief. (Id. , at ¶ 6.) The Secretary also issued a press release on December 20, 2017 explaining the new methodology for evaluating borrowers' claims (the "December 20, 2017 Press Release"). The Secretary stated: "This improved process will allow claims to be adjudicated quickly and harmed students to be treated fairly. It also protects taxpayers from being forced to shoulder massive costs that may be unjustified." (Dkt. 42-1, Ex. 1, at page 1.)
Instead of developing a "new rule" as Plaintiffs claim, the Secretary maintains that the Department came to the "common sense conclusion" that the relief for the successful borrower defense claims should be based on a measure of the actual harm that borrowers suffered as a result of Corinthian's misconduct. (Dkt. 42, at page 2.) Plaintiffs refer to the Secretary's new process as the "Average Earnings Rule." (Dkt. 42-1, Ex. 1.)
c. Method fоr Determining Relief under Average Earning Rule.
The Average Earning Rule, instead of granting full relief to borrowers who submitted attestation forms for attending schools on the Lists, is a system which provides a percentage of relief based on a comparison of earnings from a specific Corinthian program and a comparable (non-Corinthian) school with a passing gainful employment score. (Dkt. 42-2, at ¶ 14, Ex. 1, at pages 3-4.) To compare the earnings from Corinthian schools and comparable schools with a passing gainful employment score, the Department identified 79 Corinthian programs and submitted information identifying the names of 61,717 former Corinthian students to the Social Security Administration ("Social Security Administration") to obtain the data regarding the earning capacities of those students. (Dkt. 42-2, Ex. 1, at page 3.) Specifically, the Department sent information with dates of birth and Social Security numbers of the applicants who submitted attestation forms for Corinthian programs to claim the borrower defense. (Id. ) In return, the Social Security Administration provided the Department with aggregate data regarding the "mean and median incomes" for each group of students in the Corinthian programs, based on data from 2014. (Id. ) The Social Security Administration then provided that data "in a form that cannot be associated with, or otherwise identify, directly or indirectly, a particular individual." (Dkt. 35-8, Ex. 27, at page 41.) The Department refers to the information that the Social Security Administration sends as "aggregate earnings information." (Id. ) The Secretary claims that the Department exchanged this information under the terms of an agreement between the two agencies: Amended Information Exchange Agreement between the Deрartment of Education & the Social Security Administration for Aggregate Earnings Data (the "Gainful Employment Agreement"). (Dkt. 35-8, Ex. 27.)
Using the data from the Social Security Administration, the Department compared the earnings under four different formulas, using the mean and median earnings for Corinthian students with the mean and median earnings of students at comparable programs with passing gainful employment scores. (Dkt. 42-2, Ex. 1, at pages 3-4.) Although the process is more complicated than this general description, the general, relevant parameters are that the Department analyzed the difference between the earnings of Corinthian borrowers and the earnings of students from schools with passing gainful employment scores. If the earning from the passing school was higher than the earning of the Corinthian students, this difference represented the educational value or lack of educational value of the Corinthian program. (Id. )
Based on the methodology above, those borrowers in a Corinthian group who earned less than 50% of the earnings of comparable programs with passing gainful employment scores received 100% relief from their loans. (Dkt. 42-2, Ex. 1, at pages 4-5.) Borrowers in a Corinthian group who earned between 50% and 90% of the earnings of comparable programs with passing gainful employment scores received relief in amounts inverse to their earnings. (Id. , at page 4.) For example, if the average Corinthian borrower earned 60% of the average received in the comparable program, the Corinthian borrower received 40% relief. (Id. , at page 4.) All approved borrowers receive a minimum of 10% in relief. (Id. , at page 5.) The Secretary
CCI Earnings as a Percentage of GE Amount of Relief [Gainful Employment] Earnings 1% tо 49% 100% 50% to 59% 50% 60% to 69% 40% 70% to 79% 30% 80% to 89% 20% 90% and above 10%
(Dkt. 42-1, Ex. 1.)
The December 20, 2017 Press Release reported that the Department approved 12,900 pending claims for discharge and denied 8,600 claims. (Id. ) Many of the denials were ones that the previous administration had identified but for which the previous administration had not yet acted. (Id. ) The Secretary advised borrowers that the Department would notify them on a rolling basis as the Department finalized their discharges. (Id. )
d. Current Status.
As of April 1, 2018, borrowers filed over 147,000 claims under the borrower defense rule, and 99,000 claims remained pending. (Dkt. 42-3, at ¶ 4.)
3. Claimants' Discharges under the Average Earnings Rule.
Plaintiffs submit several declarations from borrowers who attended Corinthian programs, borrowed Direct Loans, and asserted a borrower defense to obtain relief from repayment.
a. Plaintiff Jennifer Craig.
Named Plaintiff Jennifer Craig submitted a claim for relief from her student loan under the borrower defense. (Dkt. 35-1.) She attended Everest College in California and relied upon statistics that Corinthian's representatives showed her about the success of graduates in getting jobs in medical insurance and billing. (Id. , at ¶¶ 7-10.) She enrolled in the Everest program in April 2014 and borrowed $9,019 to pay for her education. (Id. , at ¶¶ 10-11.) Although she completed her course of study, she did not receive a diploma because Corinthian closed in 2015 before she could get her diploma. (Id. , at ¶¶ 14-17.) Craig was not able to find work in the area of study - medical insurance billing - and later learned that, in order to get a job, she needed at least one year of experience that she had not obtained in her practical training at Corinthian. (Id. , at ¶¶ 18 - 19.) Craig submitted an attestation form to the Department for relief from repayment of her Direct Loan, and she received notice that the Department had discharged only 20% of her Direct Loan. (Id. , at ¶¶ 21, 23, Ex. 1.) The letter from the Department does not provide a detailed explanation for the determination of relief of only 20%, but it states:
The amount of loan relief that you will receive is based on the Department's assessment of the value of the education that you received. The Department has determined the value of your education by comparing the average aggregateearnings of students who attended yours program(s) of study to the average aggregate earnings of students who graduated from similar programs at other schools that have adequately prepared students for gainful employment, under the standard set forth by the Department's regulations at 34 C.F.R. Part 668, Subpart Q.
(Id. , Ex. 1.) There is no more information about the way in which the relief was calculated and no information about a process of appealing or challenging the decision. The letter states: "If you have questions about this notice, please contact the Department of Education at FSAOperations@ed.gov or at 1-855-279-6027." (Id. ) Craig and her husband have a very limited income or no income, and their expenses for their family exceed their income. (Id. , at ¶¶ 26 - 30.) They appear to live, by any definition, in poverty. The existence of loans with the obligation to repay 80% of her Direct Loan causes Craig stress on a daily basis. (Id. , at ¶¶ 31-32.)
b. Plaintiff Jamal Cornelius.
Plaintiff Jamal Cornelius attended a Heald College program in information technology because recruiters told him that he could obtain a high-paying job. (Dkt. 35-2, at ¶ 6.) He began his program in July 2013 and borrowed a total of $25,555 in federal student loans and $2,000.26 in private loans. (Id. , at ¶ 13.) In 2015, Cornelius began making repayments of $273.64 per month. (Id. , at ¶ 14.) Cornelius submitted his attestation form in the summer of 2016 and resubmitted it in August 2016. (Id. , at ¶¶ 16-18.) Cornelius initially paid the loans but then requested loan forbearance because he was not able to make the payments. (Id. , at ¶¶ 22-23.) He learned that the only forbearance program he could seek would capitalize the interest on his loan. (Id. , at ¶ 24.) Cornelius is still waiting for a decision on his request for discharge and repayment of his federal loans. (Id. , at ¶ 25.) Cornelius has not been able to obtain a job in information technology and is working at Taco Bell in Hercules, California. (Id. , at ¶¶ 11-12.)
c. Plaintiff Rthwan Dobashi.
Plaintiff Rthwan Dobashi attended a WyoTech program in automotive technology in Fremont, California, after seeing advertisements about high-paying jobs. (Dkt. 35-3, at ¶ 5.) Dobashi borrowed $22,184 in federal student loans and $3,183.73 in private loans. (Id. , at ¶ 11.) He made monthly repayments, even though he was not able to find a job in the area where he trained. (Id. , at ¶¶ 10, 12.) Dobashi wants to return to school but cannot do so because of the loans he has to repay. (Id. , at ¶ 13.) He submitted an attestation form for discharge of his loans and also asked for forbearance of his loans in April 2016. (Id. , at ¶¶ 16, 17.) The Department notified him that his loans were in forbearance but accruing interest at the rate of $76.27 per month. (Id. , at ¶ 18.) He has not received a response from the Department, even though he submitted his attestation form over two years ago. (Id. , at ¶¶ 16, 19-21.)
d. Plaintiff Alina Farajian.
Plaintiff Alina Farajian attended Everest College to become a medical assistant. (Dkt. 35-4, ¶ 23.) Everest's recruiters assured Farajian that she could attend even though she had a learning disability and assured Farajian that Everest had a job placement program that could assist her in getting a job. (Id. , at ¶¶ 9, 10, 12-13.) Farajian also reviewed brochures that listed very high job placement rates. (Id. , at ¶ 18.) Farajian finally enrolled in the summer of 2013 and borrowed $5,000 in federal Direct Loans. (Id. , at ¶ 24.) Her mother borrowed $10,000 in PLUS loans. (Id. , at ¶ 24.) Farajian completed her program and
PLAINTIFFS' PROPOSED INJUNCTION
Plaintiffs seek class-wide preliminary injunctive and declaratory relief to return to the status quo ante . The proposed class of Plaintiffs is defined as:
all individuals who borrowed a Direct Loan to finance the cost of enrollment in a program who are covered by the Department's Corinthian Job Placement Rule, who have applied or will apply for a borrower defense, and who have not been granted the full relief provided for by the Rule.
(Dkt. 58, at ¶ 257.) Plaintiffs identify the class of borrowers who attended programs in the Lists for the time periods in the Lists. (Dkt. 35-6, Exs. 6-7) Plaintiffs seek an injunction ordering the Department:
to cease all efforts to collect outstanding federal student loan debt from Plaintiffs, to ensure the removal of negative credit reporting on Plaintiffs' outstanding federal student loan debt, to restore federal student loan eligibility to Plaintiffs in the amount of their non-discharged Corinthian federal student loan debt, to stop applying the "Average Earnings Rule" to members of the proposed class, and to process Plaintiffs' claims under the "Corinthian Job Placement Rate Rule[.]"
(Dkt. 35, at page 1.)
ANALYSIS
A preliminary injunction requires that Plaintiffs establish: "(1) likely success on thе merits; (2) likely irreparable harm absent preliminary relief; (3) [that] the balance of equities tips in [Plaintiffs'] favor; and (4) that an injunction is in the public's interest." Doe v. Kelly,
A. Likelihood of Success on the Merits.
Plaintiffs attack the actions of the Secretary under the Administrative Procedures Act (the "APA"). The APA allows a court to set aside an "agency action" only under limited circumstances:
To the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action. The reviewing court shall --(1) compel agency action unlawfully withheld or unreasonably delayed; and
(2) hold unlawful and set aside agency action, findings, and conclusions found to be -
(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; [or]
(B) contrary to constitutional right, power, privilege, or immunity[.]
1. Is the Average Earnings Rule a Final Agency Action?
The threshold question for any action under the APA is whether the challenged action is the type of action - a "final agency action" - which the Court can review. Plaintiffs argue that the Department's abandonment of the Corinthian Rule and adoption of the Average Earning Rule constitute a final agency action that is subject to judicial review. (Dkt. 35, at pages 26-27). A "final agency action" is one that "mark[s] the consummation of the agency's decision-making process" and "one by which rights or obligations have been determined or from which legal consequences will flow." Bennett v. Spear,
The Secretary argues that the adoption of the Average Earnings Rule is not a "final agency action" and thus not subject to review. The Secretary's argument fails under Bennett. First, the adoption of the Average Earnings Rule marks the consummation of the Secretary's decision-making - that the Secretary will review and analyze applications from borrowers under a specific plan. Second, legal consequences will follow based on these calculations for those borrowers. See Salazar v. King,
As noted above, the Secretary doсumented the Average Earnings Rule in the December 15, 2017 Memorandum and in the December 20, 2017 Press Release. (Dkt. 42-1, Ex. 1; Dkt. 42-2, Ex. 1.) These two documents show that the Secretary made a final decision about how to evaluate claims for borrowers who attended Corinthian schools on the Lists and show that the Secretary adopted specific methodology for that evaluation. Thus, the first part of the test is satisfied because the Secretary consummated decision-making. Second, there is no dispute that legal consequences flow from the Department's adoption of the Average Earnings Rule, as the Department has applied and is applying the Average Earnings Rule to determine the amount of relief each borrower obtains. (Dkt. 42-2, at ¶¶ 23-34.) See
Because the Average Earnings Rule is a "final agency action" subject to review, the Court must then analyze the three arguments that Plaintiffs make to attack the Average Earnings Rule.
2. Does the Average Earnings Rule Violate the Privacy Act?
Plaintiffs argue that the Average Earnings Rule is "otherwise not in accordance with law" pursuant to
a. Does the Privacy Act Allow this Type of Injunctive Relief?
Before even addressing the merits of the Privacy Act, the Secretary argues that Plaintiffs cannot seek injunctive relief here because the Privacy Act provides a "comprehensive remedial scheme" that limits injunctive relief to two narrow areas not sought here. In Doe v. Chao, the Court held that the Privacy Act authorizes injunctive relief only in the following circumstances: (1) to order an agency to amend inaccurate, incomplete, irrelevant or untimely records, or (2) to order an agency to allow an individual access to his or her records.
Despite this restriction under the Privacy Act, the Supreme Court indicated in two later cases that a party can seek injunctive relief under the APA - and not under the Privacy Act - to attack a rule that violates the Privacy Act. FAA v. Cooper ,
Thus, a plaintiff cannot seek injunctive relief under the Privacy Act if that injunctive relief exceeds the scope of the remedies allowed under the Privacy Act, but a plaintiff may seek injunctive relief under the APA if an agency has taken an action in violation of the Privacy Act. The Court therefore finds that Plaintiffs can seek injunctive relief under the APA for a final agency action that violates the Privacy Act.
b. Does the Privacy Act Allow Disclosure?
The Privacy Act provides: "No agency shall disclose any record which is contained in a system of records ... to another agency." 5 U.S.C. § 552a(b). As noted above, the Department sent to the Social Security Administration the following: names, dates of birth, and Social Security numbers of the claimants who submitted attestation forms to obtain relief under the borrower defense rule. (Dkt. 42-2, Ex. 1, at page 3.) The Social Security Administration then provided the Department with the mean and median annual earnings of the students in aggregate form, without any personal identifying information. (Dkt. 35-8, Ex. 27, at page 1.) Plaintiffs challenge this exchange of information as a violation of the Privacy Act. There are two acts of disclosure: (1) the Department's sending of names, Social Security numbers, and dates of birth of claimants to the Social Security Administration, and (2) the Social Security Administration's sending of aggregate statistical data about earnings to the Department.
There is no question that the Department and the Social Security Administration are both agencies for purposes of the Privacy Act. There is no question that, with regard to the first act оf disclosure, the Department disclosed to the Social Security Administration a "record" contained in its "systems of records." The Department disclosed to the Social Security Administration the names of applicants with dates of birth and Social Security numbers. Section 552a(a)(4) defines a "record" as "any item ... of information about an individual that is maintained by an agency ... that contains ... [an] identifying number ... or other identifying particular assigned to the individual." Section 552a(a)(5) defines a "system of records" as "a group of any records under the control of any agency from which information is retrieved by the name of the individual or by some identifying number, symbol, or other identifying particular assigned to the individual." When the Department disclosed to the Social Security Administration information about the applicants' Social Security numbers and dates of birth from the Department's files, that disclosure violated the Privacy Act unless the Privacy Act exempts the disclosures.
The Privacy Act lists several specific exceptions to the prohibition of disclosure of information, none of which apply here. 5 U.S.C. § 552a(b)(1) - (12). The exception the Secretary asserts here is the alleged ability to share "aggregate statistical data." That term arises only in the Privacy Act in a discussion of a process in which federal agencies may share data in "matching programs." 5 U.S.C. § 552a(o). The Privacy Act defines "matching programs" as "any computerized comparison of ... two or more automated systems of records ... for the purpose of, ... or continuing compliance with statutory and regulatory requirements by, applications for, recipients or beneficiaries of, participants in, or providers of services with respect to, cash or in-kind assistance or payments under Federal benefit programs, or recouping payments or delinquent debts."
Matching programs must satisfy several procedural requirements: (1) the agencies must have entered into a written agreement specifying the purpose, legal authority and cost savings of the matching program, 5 U.S.C. § 552a(o) ; (2) the executive department must inform applicants for a federal benefit that matching programs may be used to verify their applications, 5 U.S.C. § 552a(o)(1)(D) ; (3) the agency must notify individuals that they have the right to contest the agency's findings from the matching program before the agency take any adverse action, 5 U.S.C. § 552a(p) ; and (4) the agency must report any new or revised matching program to the House Committee on Government Operations, the Senate Committee on Governmental Affairs, and the Office of Management and Budget. 5 U.S.C. § 552a(o)(2)(A) ; 5 U.S.C. § 552a(r).
Thus, if the sharing of data between the Social Security Administration and the Department is a matching program as defined by the Privacy Act, the agencies must comply with the requirements listed above. It is undisputed that the Department and Social Security Administration did not comply with the requirements above and thus violated the Privacy Act.
Probably because the Department did not adhere to the requirements of a matching program, the Secretary argues that the sharing of information by the Department with the Social Security Administration does not constitute a matching program, and the Gainful Employment Agreement specifically disclaims that it is a matching program. (Dkt. 35-8, Ex. 27, at page 1.) Instead, the Secretary argues that agencies generally may share aggregate statistical data, which is what the agencies did here. Even if the Secretary is correct that the Department's sharing of information with the Social Security Administration was not a matching program and even if the Secretary is correct that agencies may share aggregate statistical data, the Privacy Act nonetheless bars the disclosure.
First, there is no simply no portion of the Privacy Act that states that agencies may share aggregate statistical data. The Secretary has a convoluted reading of the Privacy Act, which relies upon an exception to an exception that creates the alleged ability to share data. But the clear terms of the Privacy Act lay out exceptions and do not include an exception for sharing of aggregate statistical data.
But even assuming for the sake of argument that sharing of aggregate statistical data is allowed, the Department did not share aggregate statistical data with the Social Security Administration. The Department sent names, dates of births, and Social Security numbers to the Social Security Administration. The Privacy Act defines a "statistical record" as information "maintained for statistical research or reporting purposes only and not used in whole or in part in making any determination about an identifiable individual." 5 U.S.C. § 552a(a)(6). In addition, the express terms of section 552a(a)(8)(B)(ii) forbid use of data to make decisions concerning the "rights, benefits or privileges of specific individuals." Here, the information the Department disclosed to the Social Security Administration was used to make a determination about a specific individual -
And with respect to the Social Security Administration's sending of information to the Department, which did not contain personal identifiers, the disclosure again violated the Privacy Act because the disclosure was made to make a determination about an individual.
Thus, even if the Privacy Act allows agencies to share aggregate statistical data, the Privacy Act prohibits the disclosures the Secretary made here to the Social Security Administration because the Department then uses that information to make determinations about the benefits of specific individuals. For the same reason, the Privacy Act also prohibits the Social Security Administration's disclosure of aggregate statistical data to the Department because again, the Department used that information to determine benefits.
In conclusion, Plaintiffs have met their burden to show that they are likely to succeed on the merits of their argument that the Privacy Act bars the Department's disclosure of information about applicants to the Social Security Administration and the receipt and use of information from the Social Security Administration. First, the plain language of the statute bars the disclosure. Second, even if the sharing of information between the Department and the Social Security Administration falls under the exception of the matching program, the Department and the Social Security Administration did not comply with the requirements of a matching program. Finally, even if there is an exception that allows agencies to share aggregate statistical data, the Privacy Act expressly forbids the use of that aggregate statistical data to make determinations about individuals, as here the Secretary did under the Average Earnings Rule. The Secretary simply fails to point to an exception to the Privacy Act that allows disclosure of the specific information about the applicants to the Social Security Administration and that allows the disclosure of the aggregate data from the Social Security Administration to the Department for the Department's use in determining relief for borrowers.
3. Does the Average Earnings Rule Violate Plaintiff's Due Process Rights?
Separate and independent from their arguments under the APA, Plaintiffs contend that the Secretary violated their due process rights by failing to provide them with "adequate procedural protections" in evaluating their claims for relief under the borrower defense rule. (Dkt. 35, at page 35.) Plaintiffs allege that they have a "property interest" in the "outcome of their borrower defense application[s]." (Id. ) Plaintiffs have a slightly shifting definition of their property rights, as they also contend that they have a right to the relief under the Corinthian Rule, which Plaintiffs claims is full relief or total discharge: "Plaintiffs simply request that the [Department of Education] continue to review applications [for relief under the borrower defense rule] under its prior (streamlined and easier to administer) rule[.]" (Dkt. 48, at page 9.) The "prior ... rule" is the Corinthian Rule.
a. Do Plaintiffs Have a Property Right?
In order to proceed with a due process claim, Plaintiffs must show that they have a protected interest in property or liberty and that the Secretary denied them adequate procedural protections in depriving them of that right. Bd. of Regents v. Roth ,
Here, by definition, there can be no "right to an outcome" that is mandatory in nature. Thus, by the way that Plaintiffs frame their purported property interest as a "right to an outcome," they cannot show that it is mandatory in nature. To the extent that Plaintiffs claim that they are entitled to relief, they cannot show that they are entitled to full relief or total discharge. Plaintiffs do not have a property interest in total discharge of their loans. Although they do have a property interest in "some" relief once they establish their borrower defense, there is no property right to the amount of relief because the Higher Education Act provides discretion to the Secretary to determine the amount of relief. The Higher Education Act states that the "Secretary shall specify in regulations which acts or omissions of an institution of higher education a borrower may assert as a defense to repayment of a loan made under this part[.]" 20 U.S.C. § 1087e(h). The regulations do not require complete discharge but instead provide discretion to the Secretary. The regulation states that a borrower may assert, as a defense to repayment of a student loan, "any act or omission of the school attended by the student that would give rise to a cause of action against the school under applicable state law."
If the borrower's defense against repayment is successful, the Secretary notifies the borrower that the borrower is relieved of the obligation to repay all or part of the loan and associated costs and fees that the borrower would otherwise be obligated to pay.
Plaintiffs, once they establish their claims for relief under the borrower defense rule by completing the attestation forms, have a mandatory right to some relief. Based on the language of the regulations, they also have a mandatory right to be notified about the amount of the relief they are receiving. However, the regulations do not provide a mandatory right to a full discharge. The Secretary has made clear in the Average Earnings Rule that borrowers who successfully complete the attestation forms will be afforded relief in the form of 10% reduction at a minimum. (Dkt. 42-2, Ex. 1, at page 5.) Even if the Secretary gives a borrower the minimum amount of relief under the Average Earnings Rule, that borrower still receives some relief from that partial discharge. Plaintiffs do not allege that the Secretary refused to provide at least some relief to borrowers who successfully completed the attestation form. Because borrowers do not have a mandatory right or entitlement to a specific amount of relief, as long as they are provided some relief, they do not have a right to procedural safeguards to regarding the relief amount, including the decision to provide less than a full discharge.
The right in Higgins , based on the section of the Higher Education Act which required a full discharge, is different from the right here, which is the mandatory right to some relief but not a full discharge, under the separate section of the Higher Education Act and its regulations.
Therefore, because Plaintiffs have not met their burden to show that they have a "property right" in the "outcome" of the adjudication of their claims for relief under the borrower defense rule, Plaintiffs cannot show likelihood of success on the merits of their argument that the Secretary's adoption and implementation of the Average Earnings Rule violates their due process rights.
b. Did the Corinthian Rule Create a Property Interest?
Plaintiffs then argue that the Corinthian Rule created their "right." However, there is much uncertainty about the contours of the Corinthian Rule. As noted above, Plaintiffs allege that the Corinthian Rule was based on documents that they do not have, and Plaintiffs infer the existence of the Corinthian Rule from secondary sources that do not discuss the Corinthian Rule in detail. As a practical matter, it appears that the Secretary did provide full relief or total discharge for borrowers who completed attestation forms before 2017. The documentation that even the Secretary submits shows that the Secretary considered the implementation of the Average Earnings Rule to be a change in policy from previous policy. (Dkt. 41-1, at ¶¶ 9-10.) In reviewing the previous approvals of borrower's applications for relief, the Secretary found that "previous approvals had been based on the assumption that CCI borrowers received a worthless education and therefore that the discharge of the total amount of borrowers' loans and reimbursement of all payments was appropriate for all CCI borrowers with valid claims." (Id. , at ¶ 9.) The Secretary then evaluated that assumption as incorrect and created a new methodology to determine the value that students gained. (Id. , at ¶¶ 16-17.) The Secretary essentially admits that there was a previous policy, even if informal, for full discharge of debt of borrowers who completed the attestation forms.
For purposes of this motion, though, the Court is troubled by the fact that there is no document in the record that lists or describes the Department's previous policy. The missing element that matters most for this motion is whether the Secretary in the previous policy reserved to the Secretary the ability to
Therefore, Plaintiffs do not meet their burden to show likelihood of success on the merits of their argument that they have a "property right" based on the Corinthian Rule. Because Plaintiffs have not met that burden, the Court will not address their argument that the Secretary in implementing the Average Earnings Rule violated their procedural rights.
4. Is the Average Earnings Rule Arbitrary and Capricious?
Because the Court finds that Plaintiffs demonstrated a likelihood of the merits that the Secretary violated the Privacy Act in her implementation of the Average Earnings Rule, it may appear that the Court need not discuss the issue of whether the Secretary's adoption of the Average Earning Rule is arbitrary and cаpricious. However, as discussed below, the Court will need to determine the remedy to the Privacy Act violation. The Court finds that a discussion of the arbitrary and capricious standard is helpful to understand the scope of the Secretary's permissible remedial actions.
The scope of review under the "arbitrary and capricious" standard is "narrow and deferential." Arrington v. Daniels ,
Plaintiffs argue that the Secretary fails to meet the standard to show that the new policy, the Average Earnings Rule, is better than the old policy, the Corinthian Rule. When an agency changes policy, it "need not demonstrate to a court's satisfaction that the reasons for the new policy are better than the reasons for the old one; it suffices that the new policy is permissible under the statute, that there are good reasons for it, and that the agency believes it to be better[.]" FCC v. Fox Television Stations, Inc. ,
However, even assuming that the Secretary had previously adopted a Corinthian Rule, the Secretary met the burden necessary to change the policy. In reviewing the previous approvals of borrower's applications for relief, the Secretary found that "previous approvals had been based on the assumption that CCI borrowers received a worthless education and therefore that the discharge of the total amount of borrowers' loans and reimbursement of all payments was appropriate for all CCI borrowers with valid claims." (Dkt. 41-1, at ¶ 9.) The Secretary then evaluated that assumption and determined that the assumption was false and made a new methodology for determining the value gained. (Id. , at ¶¶ 16-17.) The Secretary provided a justification for the Average Earnings Rule: the assumption that students who attended the Corinthian schools obtained no value is not factually accurate for all students and thus basing relief from loans on that assumption is a bad policy. (Id. , ¶¶ 15-17 and Ex. 1.) The Secretary's concern is genuine, and the attempt to create a policy to determine whether students obtained value and if so, how much, is also a legitimate exercise of the Secretary's discretion under the Higher Education Act. As noted above, the regulations promulgated under the Higher Education Act provide that the Secretary can relieve "all or part" of the loan of a borrower who successfully asserts a borrower defense and provides that the Secretary has discretion to provide relief "as the Secretary determines is appropriate under the circumstances."
Nonetheless, Plaintiffs challenge the actions in implementing that discretion as arbitrary and capricious. First, Plaintiffs challenge the Average Earnings Rule on a legal basis, since Plaintiffs claim that the Department had previously issued a legal memorandum concluding that California's Unfair Competition law is the applicable law for determining borrower's relief, and specifically that borrowers who were defrauded were entitled to a full discharge of their debt. As discussed above, Plaintiffs do not provide the legal memorandum, so the Court cannot determine if that legal memorandum was the basis for the Secretary's decision for the Corinthian Rule. The Court also cannot determine what the legal memorandum concluded or whether it was the basis for the Secretary's decision for the Corinthian Rule. The specific regulation addressing the amount or type of relief does not reference state law. See
Plaintiffs also argue that the Average Earnings Rule is arbitrary and capricious because: (1) the Average Earnings Rule is "irrational" in the manner in which the Average Earnings Rule applies the gainful employment standard, (2) the Average Earnings Rule ignores previous findings and leads to inconsistent results for borrower who submitted claims before the Average Earnings Rule and after the Average Earnings Rule, (3) the Average Earnings Rule relies upon data from third parties that is not relevant or specific to the borrowers, and (4) the Average Earnings Rule fails to take into account whether the borrower is working in the field she or he studied in determining the amount of forgiveness. (Dkt. 35, at pages 40-42.) All of these attacks are attempts to second-guess the Secretary's decision-making and substitute the Court's judgment for the judgment of the Secretary. The Secretary, in adopting the Average Earnings Rule, provided a rational reason for the Average Earnings Rule and a method - imperfect in many ways and illegal under the Privacy Act - to assess the value of what the borrower actually received as compared to the loans. However, aside from the illegal disclosure of information to the Social Security Administration and use of that data from the Social Security Administration, the Secretary's attempts to devise a more narrowly tailored system for determining the amount of relief is not arbitrary аnd capricious.
Therefore, Plaintiffs do not meet their burden to show likelihood of success on the merits of their argument that the Secretary's adoption and implementation of the Average Earnings Rule is arbitrary and capricious.
5. Does the Average Earnings Rule Constitute Retroactive Rule Making?
Plaintiffs argue also that, separate from the alleged violations of the APA, the Secretary's use of the Average Earnings Rule constitutes impermissible, retroactive rulemaking. Plaintiffs argue that an agency
The main case Plaintiffs cite, Cort , is distinguishable because in Cort , the plaintiffs
B. A Preliminary Injunction Is Necessary to Stop Irreparable Harm.
Because the Court finds that Plaintiffs have shown a likelihood of success on the merits of the APA claim, the Court must determine whether they can show irreparable harm to justify a preliminary injunction. A plaintiff seeking a preliminary injunction must demonstrate that irreparable injury is likely in the absence of preliminary relief. Winter v. Nat. Res. Def. Council, Inc.,
1. Do Privacy Act Violations and Emotional Distress Constitute Irreparable Harm?
Plaintiff Mercado states that, when she learned that her own Social Security information was used against her to forgive only 30% of her loan, she was "sad, distressed and betrayed." (Dkt. 48-1, ¶ 17.) She felt that the use of her own information against her in determining the amount of her loan forgiveness was a "slap in the face." (Id. )
As noted above, the Court finds that the Secretary's disclosure to the Social Security Administration and receipt and use of data from the Social Security Administration violates the Privacy Act because the results are used in determining borrowers' benefits - relief from loans. In this situation, borrowers can feel emotional distress, similar to Mercado's sentiments. Here, Plaintiffs Craig, Farajian, and Dobashi discuss in general terms the emotional stress that the repayment system is causing them. (Dkt. 35-1 at ¶¶ 17, 32; Dkt. 35-3 at ¶¶ 22-23; Dkt. 35-4 at ¶¶ 36, 41.)
2. Does Economic Harm Constitute Irreparable Harm?
Both parties discuss the economic harm from denial of full relief from debt. Because the Court finds that the Secretary has discretion to determine the amount of relief a borrower can receive - as long as the rule does not violate laws - the issue of economic harm is not necessarily relevant here. The Secretary's action in adopting the Average Earnings Rule is unlawful and
However, the Court notes that, because the Court finds that the Average Earnings Rule is invalid, Plaintiffs whose claims are evaluated under the Average Earnings Rule might be forced to repay higher amounts than they would under a validly constructed rule. If that is the case, then economic harm is relevant. The Court finds that Plaintiffs have shown that they are suffering irreparable harm in the form of economic harm. Although economic harm generally does not constitute irreparable injury, economic injury may be the basis for an injunction where a plaintiff lives on a fixed income and where minimal increases in the cost of living creates a "potential [for] financial disaster" and the possible deprivation of "life's necessities." United Steelworkers of Am., AFL-CIO v. Textron, Inc. ,
The Secretary argues that Plaintiffs have not shown that the repayment of loans is causing the harm that they are suffering because they have other financial problems that caused the harm. This argument seems meaningless given the dire financial circumstances that Plaintiffs describe. Given their financial situations, any additional dollar they are required to repay takes away from basic need for food and shelter. In economic terms, the marginal utility of each dollar is extremely high to the Plaintiffs.
Under these circumstances, the Court finds that Plaintiffs have shown irreparable harm because the economic harm they are suffering affects their ability to pay for life's most basic necessities.
3. Does Loss of Opportunity Constitute Irreparable Harm?
Plaintiffs also claim that they are suffering a loss of opportunity and that loss constitutes irreparable injury. Again, the harm that Plaintiffs assert in this area is linked to the failure to obtain a full discharge and not linked to the violation of their privacy rights. But for the same reasons as discussed with regard to the economic harm, the loss of opportunity for Plaintiffs who are forced to repay more for their loаns under the invalid Average
Under these circumstances, the Court finds that Plaintiffs have shown irreparable harm because they cannot recover their lost opportunities.
C. Public Interest and Balance of Equities Weigh in Favor of Preliminary Injunction.
The Court finds that the balance of equities weighs in favor of a preliminary injunction and that the public interest weighs in favor of a preliminary injunction. Although normally courts consider the third and fourth factors of the test for a preliminary injunction separately, where the federal government is a party, the last two factors of the balance of equities and public interest merge. Drakes Bay Oyster Co. v. Jewell ,
D. The Appropriate Remedy.
Plaintiffs seek an injunction ordering the Secretary to take cease two actions and to take three other affirmative actions. As described above, Plaintiffs seek an injunction in five main areas: (1) to stop "all efforts to collect outstanding federal student loan debt from Plaintiffs," (2) to remove negative credit reporting of "Plaintiffs' outstanding federal student loan debt", (3) "to restore federal student loan eligibility to Plaintiffs in the amount of their non-discharged Corinthian federal student loan debt," and (4) to stop using the "Average Earnings Rule," and (5) to
1. Is Removal of Negative Credit Reporting and Restoring Eligibility for Student Loans the Correct Relief?
The Court will not order the Seсretary to take the actions Plaintiffs seek with regard to the requests for removal of negative credit reporting and restoring eligibility for further student loans. Even if the Court were to assume that the Corinthian Rule existed, Plaintiffs' definition of the Corinthian Rule does not include this relief. (Dkt. 35, at pages 12-13.) There is no other evidence in the record to show that the Corinthian Rule included these provisions.
Furthermore, the regulation provides that the Secretary has discretion to provide that relief. Section 685.206(c)(2) states that "[f]urther relief may include, but is not limited to, the following .... Determining that the borrower is not in default on the loan and is eligible to receive assistance under Title IV of the Act," and "Updating reports to consumer reporting agencies to which the Secretary previously made adverse credit reports with regard to the borrower's Direct Loan." Under the clear terms of the regulation, the Secretary can, but is not required, to provide this relief. The Court cannot, in the absence of any evidence, force the Secretary to take action that the Secretary is not required to do. The Court therefore DENIES Plaintiffs' request for preliminary injunction to the extent that Plaintiffs seek an order requiring the Secretary to remove negative reports from Plaintiffs' reports with credit reporting agencies and to restore Plaintiffs' eligibility for further student loans.
2. Is Enjoining Use of Average Earnings Rule, Return to the Corinthian Rule and Immediate Cessation of Collection of Plaintiffs' Debts Appropriate?
Because Plaintiffs have met their burden to show likelihood of success on the merits of the argument that Secretary violated the APA by implementing a rule, the Average Earnings Rule, that violates the Privacy Act, that implementation of the Average Earning Rule is causing irreparable harm, and that the balance of equities tips in favor of Plaintiffs on this serious issue, the Court ENJOINS the Secretary from using the Average Earnings Rule as it currently exists. Normally, when a court issues an injunction, the injunction orders a return to the status quo . In this case, it is unclear what the status quo is, since there is no clear documentation outlining the parameters of the Corinthian Rule.
At this time, the Court cannot compel the Secretary to return to the Corinthian Rule, since the parameters of the Corinthian Rule are not clearly defined. See Norton v. Southern Utah Wilderness Alliance,
Thus, the Court GRANTS Plaintiffs' motion for preliminary injunction to prevent the Secretary from using the Average Earnings Rule but DENIES WITHOUT PREJUDICE Plaintiffs' motion for preliminary injunction to return tо the Corinthian Rule. With regard to the injunction for the Secretary to stop all efforts to collect Plaintiffs' loans, the Court temporarily GRANTS this request. The Secretary is ORDERED to cease all efforts to collect debts from Plaintiffs until the Court can determine the proper course of action.
The Secretary has the right to assess claims for relief from borrowers who attended Corinthian schools on the Lists who seek relief under the borrower defense rule as long as the Secretary does not violate the Privacy Act or other laws in doing so. At this time, though, because the Court is not sure how to define the status quo in the absence of key documentation, the Court requests additional briefing on this issue and will hear oral argument on this issue on June 4, 2018, the date currently scheduled for a case management conference. The hearing will be specially set for 2:30 p.m. Parties may submit supplemental briefing on this subject, to be exchanged simultaneously, on May 31, 2018. At the hearing on June 4, parties should be prepared to address the following questions:
(1) Does the Court have the authority to order the Secretary to produce the three documents that Plaintiffs allege constitute the Corinthian Rule: (1) a memorandum prepared by the Department's Office of General Counsel, (2) a fine action letter prepared by Federal Student Aid's Administrative Actions & Appeals Service Group, and (3) an April 2015 document prepared by the Federal Student Aid's Administrative Actions & Appeals Services Groups?
(2) What is the status quo ? What is the date by which the Court measures the status quo ? The Court directs the parties to a recent case on this subject: Animal Legal Defense Fund v. U.S. Dept. of Agriculture ,, *3 (N.D. Cal. May 31, 2017). 2017 WL 2352009
(3) If the Court enjoins the Secretary from using the Average Earnings Rule and the Secretary does not return to the Corinthian Rule, what steps will the Secretary take to assess claims from Plaintiffs?
(4) Do Plaintiffs contend that the Secretаry has a mandatory duty to provide forbearance pending a determination of the discharge amount? If so, what is the authority for that position? Does the Secretary dispute that she has a mandatory duty to provide forbearance pending a determination of the discharge amount? If so, what is the authority for that position?
(5) Should the Secretary treat in a different manner the borrowers who were not able to complete a program or receive a diploma or certification on the Lists because the school or program closed? If the students who were not able to completetheir program did receive some value, would it be arbitrary to treat them the same (provide the same discharge amount) as those students who were able to complete their programs?
IT IS SO ORDERED .
Notes
U.S. Department of Education: http://www2.ed.gov/policy/highered/reg/hearulemaking/2016/index.html (last visited May 25, 2018.)
The Court understands that the Secretary challenges the very existence of the Corinthian Rule, but for purposes of this Order, the Court will refer to the Corinthian Rule as a shorthand for describing the process that was, for practical purposes, in place before January 20, 2017.
For purposes of this Order, the Court will refer to the Secretary's methodology as explained in the December 15, 2017 Memorandum and the December 20, 2017 Press Release as the "Average Earnings Rule."
That the Department made no public statement of any kind indicating that borrowers would receive full discharge of loans or full refund of loans is telling. For example, the attestation forms do not state what relief the borrowers will receive. (Dkt. 35-6, Exs. 8-9.) In addition, Arne Duncan, the previous Secretary, stated: "[If] you've been defrauded by a school, we'll make sure that you get every penny of the relief you are entitled to through a streamlined process - as streamlined as possible." (Dkt. 35-5, Ex. 5, at page 2.) There was no explanation about what that relief was.
In contrast, the specific regulation addressing the right to relief does reference state law.
The plaintiffs in Cort were three individuals who did not assert a class action. Cort,
Plaintiffs contend that they are suffering irreparable harm of violation of their due process rights. Because the Court finds that Plaintiffs do not have a property interest in the outcome of their applications for borrower defenses, the Court will not analyze that harm.
With their Reply, Plaintiffs also submit the declarations of two mental health professionals, both of whom discuss the psychological effects of student loans on individuals in general. (Dkt. 48-2; Dkt. 48-3.) Neither mental health professional examined the Plaintiffs but rather only reviewed their declarations. (Dkt. 48-2, 5; Dkt. 48-3, at ¶ 23.) Given that the Court has found that Plaintiffs have submitted evidence of emotional distress, there is no need for the Court to review the declarations of mental health professionals. Moreover, the Court is not inclined to accept these additional declarations on reply without giving the Secretary a chance to address them, because they contain more than factual allegations and provide expert opinions that are subject to attack.
The briefs of amici curiae - the Debt Collective and Public Law Center - also provide examples of individual borrowers who are suffering economic hardships. (Dkt. 43; Dkt. 45.) These individual borrowers did not submit declarations under penalty of perjury, and therefore Court will not consider that information.