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ED Discharges $5.8 Billion in Borrower Defense Claims for Borrowers Who Attended Corinthian

By Hugh T. Ferguson, NASFAA Senior Staff Reporter

The Department of Education (ED) on Wednesday announced it will cancel the loans for 560,000 borrowers who attended any campus owned or operated by Corinthian Colleges, Inc. from its founding in 1995 until its closure in April 2015. In all, the discharge — which officials said is the largest single loan discharge in department history — would total $5.8 billion.

Borrowers who have not yet applied for a borrower defense to repayment claim will also have their Corinthian loans discharged without needing to take additional action, per ED’s guidance.

Vice President Kamala Harris is expected to discuss the discharge in more detail at an event on Thursday. While serving as California’s attorney general, Harris notably sued the for-profit chain based in her home state, accusing the institution — which operated more than 100 campuses in the United States and Canada — of predatory and unlawful practices that took advantage of students. During Harris’ presidential campaign, part of her higher education agenda included support for greater for-profit college accountability.

Harris’ office was successful in obtaining a more than $1 billion judgment against Corinthian.

In the announcement, ED further committed to better implement the student loan programs to ensure students can access their available benefits.

“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,” said Education Secretary Miguel Cardona. “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.”

Cardona added that the department would continue to ramp up oversight of for-profit institutions, as well as the corporations that maintain ownership of the schools.

"The long backlog of borrower defense claims illustrates how even the best intentioned public policy is only as good as what can realistically be implemented,” said NASFAA President and CEO Justin Draeger. “These borrowers have waited far too long for adjudication and relief, and we applaud the Biden administration for finally taking steps to bring them closure.”

Rep. Bobby Scott (D-Va.), chairman of the House Education and Labor Committee, said in a statement that the group discharge would clear “a cloud of uncertainty for defrauded student borrowers” who attended Corinthian schools.

“Hundreds of thousands of students were promised that a Corinthian degree would lead to a meaningful career. However, when Corinthian failed to deliver on its promise, students were left with burdensome debt and useless degrees,” Scott said. This relief is long overdue, yet the previous Administration refused to grant borrowers the relief to which they were legally entitled.”

This latest action from ED comes on the heels of the administration discharging $238 million in student loan balances from borrowers who attended a now-defunct beauty school.

Earlier this year ED also provided targeted relief for students totaling $415 million in borrower defense claims, citing additional findings that determined a number of institutions demonstratively misrepresented their course offerings and outcomes for graduates.

According to ED, with this latest announcement the Biden administration has now approved $25 billion in loan forgiveness for 1.3 million borrowers.

While implementing these latest discharges, ED continues to develop a Notice of Proposed Rulemaking (NPRM) concerning borrower defense to repayment regulations, after a negotiated rulemaking process concluded this past winter. The NPRM, which is expected to be released this summer, will be open for public comment.

The administration is also facing increasing pressure from progressives and consumer advocates to take action on widespread student loan forgiveness. Officials have said that an announcement will be coming soon. Meanwhile, millions of borrowers are waiting for their student loan payments to resume in September, when the pause on payments and interest accrual is scheduled to end.

“While we applaud the Department of Education for this targeted relief, we also call on the administration and Congress to begin working on systemic student loan reform. Student loan forgiveness — no matter how well targeted — will not solve the long-term issues that plague our student loan system,” Draeger added. “NASFAA, in partnership with more than 20 organizations, has done just that, and we urge policymakers to give these comprehensive student loan reform ideas full consideration to fix a broken system that leaves too many students and parents hopelessly buried in student loan debt.”

 

Publication Date: 6/2/2022


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