For students who attended Corinthian Colleges (a chain of for profit schools that deceived students about student job placement rates and their ability to transfer credits), the U.S. Department of Education will forgive $5.8 Billion of federal student loans.
According to the department, it is the largest student loan discharge in history.
According to the Education Department, the move will affect 560,000 borrowers.
“Wholesale financial exploitation”
The Education Department discovered that Corinthian made “widespread and pervasive misrepresentations about borrowers’ future employment prospects,” including promises to find a job.
The Department found Corinthian also falsified its public job placement rates and misled prospective students regarding their ability to transfer credit.
Secretary of Education Miguel Cardona stated that Corinthian had been engaged in financial exploitation of students for far too long. He induced them to take on more debt to pay off promises they wouldn’t keep.
Kamala Harris, California’s former Attorney General, was central to the Corinthian case. She sued the company in 2013 alleging that it used misleading and false recruitment tactics.
Harris’ case against Corinthian laid the foundation for 2015 Education Department findings against the chain. This allowed students defrauded to apply for loan cancellation under a provision called borrower defense.
According to the Department, approximately 100,000 Corinthian borrowers had their debts discharged by the traditional borrower defense process.
This latest news means that the Department will no longer require borrowers to apply for federal student loans and will automatically erase all outstanding federal student loan debts incurred while enrolled on Corinthian campuses.
Students who are affected by the bankruptcy do not need to take further steps to get a discharge. The government promises to notify borrowers as soon as possible.
Eileen Connor directs the Project on Predatory Student Lending. She says, “It’s a tremendous win.” It will improve the lives and quality of life for so many people. It will end the suffering of so many. It’s the right thing. I’m overjoyed.”
Corinthian Colleges, Inc., was established in 1995. Later, it acquired many for-profit schools throughout the country.
More than 110,000 students enrolled on its 105 campuses in 2010, which included Everest colleges. However, Corinthian had closed or sold all its campuses by 2015.
Harris and the State of California were awarded a $1.1 billion judgment in 2016. This included $820 million in student restitution and $350 millions in civil penalties.
25 billion dollars in loan forgiveness to date
This is the Biden administration’s latest and biggest aEUR” effort to offer targeted student loan relief.
The department announced in February that it would accept borrower defense claims, while DeVry University, which was accused of defrauding borrowers remained open for business.
NPR investigated NPR reports that the Education Department also made it easier to get rid of debts by offering a Public Service Loan Forgiveness program, and a separate loan discharging program for permanent disabled borrowers.
According to the Biden Administration, $25 billion has been granted in loan forgiveness to 1.3 million borrowers.
However, it’s unclear what this move means about the possibility for a wider loan forgiveness.
The White House has been under pressure since leaking to journalists that Biden might soon announce plans for a $10,000 loan forgiveness to each borrower with income limits. Officially, however, the White House maintained late last week that no decisions had been made.
This story has been updated to include new details
