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Corinthian Colleges students to get federal student debt forgiven

The famous chain of for-profit universities collapsed in 2015.

WASHINGTON — Hundreds of thousands of students who attended for-profit chain Corinthian Colleges will automatically have their federal student loans forgiven, the Biden administration announced Wednesday, a move that seeks to end one of the fraud cases the most notorious in American higher education. education.

Under the new action, anyone who participated in the now-defunct chain from its founding in 1995 until its collapse in 2015 will have their federal student debt erased. It will clear $5.8 billion in debt for more than 560,000 borrowers, the largest single loan discharge in the Department of Education’s history, according to the agency.

“Starting today, every student deceived, defrauded and indebted by Corinthian colleges can be assured that the Biden-Harris administration has their backs and will pay their federal student loans,” the Secretary of State said. Education, Miguel Cardona. “For too long, Corinthian has engaged in the large-scale financial exploitation of students, driving them into deeper and deeper debt to pay for promises they would never keep.”

Tens of thousands of former Corinthian students were already eligible for debt forgiveness, but had to file paperwork and navigate an application process that advocates say is confusing and little known. From now on, the relief will be made automatic and extended to other borrowers.

Those with a remaining balance on their Corinthian debt will also receive refunds on payments they have already made, Education Ministry officials said. But the action does not apply to loans that have already been fully repaid.

At its height, Corinthian was one of the nation’s largest for-profit university corporations, with more than 100 campuses nationwide and more than 110,000 students at its Everest, WyoTech, and Heald schools.

But the company closed in 2015 due to numerous fraud discoveries. The Obama administration — working with Kamala Harris, who was then California’s attorney general and later became vice president — discovered that dozens of campuses were falsifying data on their graduates’ success. In some cases, schools reported that students found jobs in their field of study even if they worked in grocery stores or fast food chains.

Hundreds of students told investigators they had been pressured to enroll with promises of lucrative jobs, only to find themselves with huge debts and few job prospects. Federal officials also discovered that the company had falsely told students that their course credits could be transferred to other colleges.

The case inspired a federal crackdown on for-profit colleges, and the Obama administration promised to cancel loans to Corinthian students whose programs lied about placement rates. The administration then extended a process known as the borrower’s defense to repayment, which allows any defrauded student to seek cancellation of their debt.

But an explosion of demands for debt forgiveness, along with political battles over the process, have created a years-long backlog in the process, leaving many former Corinthian students still awaiting relief.

In December, the Department of Education reported that it had more than 109,000 pending applications from students alleging fraud by their colleges, including many Corinthian students. Borrowers and their advocates urged the government to write off all Corinthian debt, saying evidence of misconduct was so widespread that all students in the chain were defrauded.

The administration announced the action on Wednesday as President Joe Biden considers broader student loan forgiveness for millions of Americans. As a candidate, Biden said he supports canceling $10,000 in student loans for all borrowers. He later indicated that such action would have to go through Congress, but the White House said it was considering pursuing it with executive branch action.

Lawyers said the Biden administration’s decision does justice for a long time.

“This is a tremendous student victory, and it belongs to the tens of thousands of borrowers who have been deceived and abused by Corinthian Colleges,” said Eileen Connor, director of the Project on Predatory Student Lending, which represented Corinthian students in lawsuits. They have never stopped fighting – through three administrations – for the justice they deserve under the law.

Libby DeBlasio Webster, senior counsel for the advocacy group Student Defence, said the news gives a “fresh start” to former Corinthian students, but she noted that many defrauded students from other for-profit colleges are still waiting for help. ‘assistance.

“We also hope that today’s news is a sign that more decisions are on the horizon for thousands of students in the same situation who are waiting for this kind of relief,” she said. .