Commonwealth of Massachusetts v. Department of Education


UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA COMMONWEALTH OF MASSACHUSETTS et al., Plaintiffs, Case No. 1:17-cv-02679 (TNM) v. UNITED STATES DEPARTMENT OF EDUCATION et al., Defendants. MEMORANDUM OPINION Corinthian Colleges, Inc., once operated over a hundred for-profit college campuses across the country. Multiple state and federal investigations revealed that Corinthian defrauded students by falsifying its post-graduation job placement data. Facing millions of dollars in fines and allegations of deceptive marketing, Corinthian filed for bankruptcy and announced the closure of its schools in 2015. The Department of Education oversees federal loan programs that provided financial aid to thousands of Corinthian enrollees. Student borrowers may assert as a defense against repaying their loans any conduct by a school that would give rise to a cause of action against the school under applicable state law. See 34 C.F.R. § 685.206(c). In the wake of Corinthian’s collapse, more than 100,000 borrowers have raised this defense. Defs.’ Mem. in Supp. of Mot. to Dismiss 9, ECF No. 26-1 (“Defs.’ Mem.”). To apply for relief, the students must attest that they were enrolled in a Corinthian-operated program that misrepresented job placement rates and that they relied on this misrepresentation when deciding to enroll. Id. at 10. Borrowers who have not submitted an attestation remain subject to the Department’s debt collection efforts, including wage garnishment orders and tax refund seizures. Am. Compl. 26. Massachusetts, Illinois, and New York (collectively, the “States”) challenge the Department’s collection activity. They contend that the debts incurred by former Corinthian students are not legally enforceable and that subjecting these borrowers to wage garnishment and refund seizures is arbitrary and capricious in violation of the Administrative Procedure Act (“APA”). Am. Compl. 30. They seek declaratory and related relief on behalf of the students who attended Corinthian schools in the three states. The Defendants moved to dismiss the case, arguing that the States lack standing to sue, that they fail to sufficiently allege “agency action” as required by the APA, and that the Department’s collection activity is lawful. See Defs.’ Mem. at 14-32. Because the Court finds that the States have not established standing to bring this action, it will grant the Defendants’ motion. I. Title IV of the Higher Education Act allows college students to apply for and receive loans from the federal government to pay for educational expenses. See 20 U.S.C. § 1087a et seq. While these loans must generally be repaid, the Department has the authority to specify certain “acts or omissions of an institution of higher education [that] a borrower may assert as a defense to repayment of a loan made under [the Act].” Id. at § 1087e(h). The Department’s regulations allow borrowers to raise as a defense “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.” 34 C.F.R. § 685.206(c). 2 Federal law requires the Department to “try to collect” any “claim of the United States Government for money ...

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