In the months since the Department of Education (ED) announced a multi-track process for debt relief for Corinthian Colleges students, thousands have submitted requests for closed school loan discharges and borrower defense claims, according to a report released Thursday from Joseph Smith, ED’s special master for borrower defense. Smith was appointed in June by Under Secretary of Education Ted Mitchell and specifically tasked with advising the Department about borrower defense issues.
The report, which is the first in a series planned for release, gives an update on actions ED has taken in the last several months to developing a longstanding process for debt relief claims that is “fair, transparent, and efficient, with minimal burden on borrowers.” ED officials have repeatedly said that their goal is to create a process to serve students who attended Corinthian Colleges – which operated Heald College, Everest, and Wyotech campuses across the country – as well as students at other institutions who feel they have been defrauded.
“The unfortunate reality is that some colleges, including certain career colleges, have used abusive practices to prey on students,” Smith’s report said. “They have made false and misleading statements to students or prospective students about the value of certain career college programs or the financing needed to pay for a program. Such practices can have serious adverse effects for both students and taxpayers.”
So far, ED has received 4,140 borrower defense claims – those filed by students who believe they were defrauded by their schools – and 7,815 closed school discharge claims (3,128 of which have been approved) from Corinthian students. Additionally, ED has received 7,696 requests from students seeking to have their loans put into forbearance or have collections on defaulted loans stopped while their claims are processed. A dedicated call center within ED for borrower defense claims has received 7,344 calls as of August 26, and a dedicated email inbox has received 4,114 messages. In terms of outreach, ED also sent more than 54,000 emails to Heald College students to notify them about their debt relief options.
Of the 4,140 borrower defense claims filed, 1,992 were attestation forms from Heald College students. When ED announced its plan for a debt relief process in June, it said students who had attended Corinthian’s Heald College campuses would be eligible to file expedited attestation forms to have their loans discharged, because sufficient evidence already existed that showed the school violated state law by falsifying job placement rates.
Smith’s report also details the statutory and regulatory framework regarding borrower defense claims, as well as the events that led to Corinthian’s collapse at the end of April. Corinthian reached an operating agreement with ED in July 2014 that required the for-profit college chain to cease operations at its campuses through implementing teach-out agreements for at least a dozen campuses and selling the rest.
In November 2014, Corinthian announced it would sell 53 of its Everest and WyoTech campuses, which enrolled roughly 35,000 students, to the nonprofit Zenith. In April 2015, ED completed part of its investigation into Corinthian’s job placement rates that initially caused the institution to be placed on heightened cash monitoring, and issued a $30 million fine against Corinthian for inflating job placement rates at its Heald College campuses in California. Not long after, Corinthian announced on April 27 that it would immediately shut down the more than two dozen remaining campuses in California, Oregon, and Hawaii – an action that made those students who had not completed their programs eligible to file closed school discharge claims. ED extended the discharge period from the typical 120-day window to students who were enrolled as of June 20, 2014.
Following Corinthian’s closure, NASFAA partnered with ED and several other organizations to connect displaced Corinthian students with volunteers who can help them get answers to questions about financial aid and filing debt relief claims.
“At this point, it is difficult to say how quickly that number of claims will grow, but it is safe to assume it will increase – although it should be noted that not all borrowers that attended affected schools may wish to submit a borrower defense claim,” the report said. “Department leadership agrees that the best way to meet its goal of creating a fair, transparent, and efficient process for handling borrower defense claims is to establish an infrastructure that is flexible and scalable.”
Part of that infrastructure, Smith wrote, includes human resources. Until Corinthian’s collapse, ED had received only a handful of borrower defense claims, and is now dealing with processing several thousand. ED plans to hire staff “dedicated solely to this issue,” Smith wrote, and has already hired four attorneys, who will begin working this month specifically on debt relief claims.
Moving forward, Smith will work with ED to build the framework necessary to review and process borrower defense and closed school discharge claims, the report said. Within the next three months, Smith wrote, all Heald attestation forms submitted “will be initially reviewed and determinations of eligibility for loan discharges will be made.” Smith and the other attorneys hired by ED will review other claims and – with the input of different stakeholders – develop a “streamlined intake form” borrowers can use to submit their claims.
“My message to students is that I hear you. I take this responsibility seriously and am working hard to give you the relief you deserve and leaving no stone unturned in exploring this issue,” Smith said in a press call. “Meanwhile, though I know it’s hard. I hope you continue to pursue your educational and career goals."
Publication Date: 9/4/2015