ED Launches Effort to Clarify and Streamline Debt Relief for Defrauded Students

By Allie Arcese, Director of Communications

By Allie Bidwell, Communications Staff

The Department of Education (ED) on Wednesday announced it will begin the process to develop regulations to streamline the loan forgiveness process for students who file defense to repayment claims on their federal student loans, similar to the situation thousands of former Corinthian Colleges students are currently facing.

In June, ED detailed a multi-track process for former Corinthian Colleges students – who also attended Corinthian-operated Heald College, Everest College, and WyoTech campuses – to apply to have their loans forgiven. The embattled for-profit college chain has been in a tussle with ED for more than a year and in April abruptly announced that it would immediately close 28 campuses throughout California, Hawaii, and Oregon, leaving roughly 16,000 students without a school to attend, but presumably on the hook for federal student loans they had taken out.

“The process we are beginning today aims to create a clearer, more comprehensive system to assist students who believe they were defrauded by their college,” said Education Secretary Arne Duncan, in a statement. “And we think it is critical that this solution also does right by American taxpayers. That's what they deserve.”

On Wednesday, ED officials said in a call with reporters that they will hold two public hearings in September – one on the West Coast and one in Washington, D.C. – before beginning the negotiated rulemaking process to clarify how borrowers who believe they were defrauded by their institutions can receive debt relief and strengthen accountability measures for the institutions responsible for deceiving students. Education Undersecretary Ted Mitchell said the goal is to create “a durable, transparent, efficient, and fair process” that will exist past the struggle with Corinthian Colleges. He said ED is aiming to release final regulations by November 1, 2016, to become effective by July 1, 2017.

Mitchell said this is the next step in a longer-term process to help students at other schools seeking debt relief, and to help prevent similar situations in the future.

“Moving forward we think that new regulations will create a better process by which borrowers who have been victims of fraud may seek loan forgiveness,” Mitchell said.

In the meantime, Mitchell said claims that have already been filed will continue to be reviewed through the existing process. So far, ED has received about 7,000 defense to repayment claims from Corinthian students, or about 43 percent of those eligible to apply, given the timeframe officials laid out in June. ED has also received about 1,500 attestation forms from Heald students who were able to apply for relief through an expedited process, according to Mitchell.

Mitchell noted that while ED is likely to face opposition from some – particularly the for-profit college industry – he is confident the regulations will be put in place.

“We will protect students. We will protect borrowers. We will hold institutions accountable. Period,” Mitchell said. “The process that we’re talking about will have controversy, but we’re not in the business of backing down. We have not backed down to significant pressure from the industry around gainful employment, and we do not expect and will not back down on these issues.”


Publication Date: 8/20/2015

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