Student loan debt wiped clean for former Corinthian students

WASHINGTON (AP) — Hundreds of thousands of students who attended the for-profit Corinthian Colleges chain will automatically get their federal student loans canceled, the Biden administration says, aiming to bring closure to one of the most notorious cases of fraud in American higher education.

Anyone who attended the now-defunct chain from its founding in 1995 to its collapse in 2015 will get his or her federal student debt wiped clean. The move will erase $5.8 billion in debt for more than 560,000 borrowers, in what the Education Department said was the largest single loan discharge ever.

“As of today, every student deceived, defrauded and driven into debt by Corinthian Colleges can rest assured that the Biden-Harris Administration has their back and will discharge their federal student loans,” Education Secretary Miguel Cardona said Wednesday. “For far too long, Corinthian engaged in the wholesale financial exploitation of students, misleading them into taking on more and more debt to pay for promises they would never keep.”

Tens of thousands of former Corinthian students were already eligible for debt cancellation, but they had to file paperwork and navigate an application process that advocates say is confusing and not widely known. Now, the relief will be made automatic and extended to additional borrowers.

Those with a remaining balance on their Corinthian debt will also get refunds on payments already made, department officials said. But the action does not apply to loans paid in full.

At its peak, Corinthian was one of the largest for-profit college companies. It had more than 100 campuses and more than 110,000 students at its Everest, WyoTech and Heald schools.

The company shut down in 2015 amid widespread findings of fraud.

The Obama administration — working with now-Vice President Kamala Harris, who was California attorney general at the time — found that scores of campuses were falsifying data on the success of their graduates. In some cases, the schools reported that students had found jobs in their fields of study even though they were working at grocery stores or fast food chains.

Students commonly told investigators they were pressured to enroll with promises of lucrative employment, only to end up with huge sums of debt and few job prospects. Federal officials found that the company falsely told students 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 forgive loans for Corinthian students whose programs lied about job placement rates. That administration went on to expand a process known as borrower defense to repayment, which allows any defrauded student to apply for debt cancellation.

But an explosion in applications for debt forgiveness, along with political battles over the process, created a yearslong backlog in the process, leaving many former Corinthian students still awaiting relief.

The Trump administration generated blowback when it started granting only partial loan cancellation to defrauded students, giving lower levels of relief to those with higher incomes. Former Corinthian students sued over the change. A federal judge halted the policy and ordered the Education Department to stop collecting payments on Corinthian debt.

The Biden administration later announced full cancellation for all Corinthian students who had been given only partial forgiveness, but thousands of others were left waiting for the department to process their relief applications.

As of December, the department reported it had more than 109,000 pending applications from students alleging fraud by their colleges, mostly in the for-profit industry. Borrowers and their advocates have urged the government to erase all Corinthian debt, saying evidence of misconduct was so widespread that all the chain’s students were the victims of fraud.

The administration’s announcement on the Corinthian debt cancellation comes as President Joe Biden faces mounting pressure to enact broader student loan forgiveness for millions of people. As a candidate, Biden said he supports forgiving $10,000 in student loans for all borrowers. He later indicated that such action should come through Congress, but the White House has said he is considering whether to pursue it through executive action.

Advocates said the government’s decision on Corinthian brings long-delayed justice.

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

Libby DeBlasio Webster, senior counsel for the advocacy group Student Defense, called it a “fresh start” for former Corinthian students, but she noted that many defrauded students from other for-profit colleges are awaiting help.

She said she hopes the news “is a sign that other decisions are on the horizon for thousands of similarly situated students who are waiting for this kind of relief,” she said.

Former Corinthian student Nathan Hornes said the chain was “absolute joke of a school,” recalling how he was once instructed to play a board game as the final exam for a class at Everest Institute’s Los Angeles campus. Hornes had his debt forgiven in 2017 through the borrower defense process, but his sister Natasha is among the 560,000 former Corinthian students now getting cancellation.

“My sister and all the others who went through the same experience of being cheated by Corinthian finally get to experience the same relief of having the financial burden lifted,” he said in a statement. “They deserve that too, and I’m so glad that today they finally get to feel that freedom.”

A for-profit college trade group said students who are deceived by their colleges deserve relief, but that Corinthian ‘s actions “do not represent all private career schools.”

“The (Education) Department and others should not conflate the actions of one organization with an entire sector that has provided opportunities for millions of students and contributed to our nation’s workforce,” said Jason Altmire, president and CEO of Career Education Colleges and Universities.