NAICU Washington Update

Department of Education Announces Debt Relief Plan for Corinthian College Students

June 22, 2015

The Department of Education announced on June 8, its plan to provide relief for many students left holding student loan debt when Corinthian College abruptly closed last year. The for-profit was accused of illegal practices and assessed a $30 million fine by the Department.

As part of its broader campaign to eliminate fraudulent colleges from receiving federal student aid, the Department said it would discharge the debt of all students who attended one of Corinthian’s closed campuses. In addition, the Department is giving the students a longer eligibility window. The loans of students who attended a Corinthian campus after June 20, 2014, the date on which Corinthian agreed with the Department on its termination, will also be forgiven. (Currently, only students who are attending a school when it closes, or who withdrew within 120 day of its closing, are eligible for discharge of their loans.) According to Inside Higher Education, the Department already has 1,400 existing debt relief claims.

Other students may also be eligible for a stream-lined loan forgiveness process, under a “defense to repayment” if they can prove the college’s actions violated state law that affected the provision of educational services. The Department says it will try to provide such relief to groups of students on a campus in the same program at the same time. In one case, wide-spread misrepresentation of job placement rates by Corinthian’s Heald College in California, between 2010 and 2015, will enable students who attended during that time period to become eligible for loan forgiveness and reimbursements based on simple attestation. The Department estimates there may be up to 350,000 students who would meet this criteria. If they all applied for relief, it would cost the government $544 million. (Additional information is available at Several education organizations, including the National Association of Student Financial Aid Administrations, have established a volunteer coalition to help students determine their options.

The Department is appointing a Special Master to oversee borrower defense issues and ensure an expedited process. The Special Master, who is expected to be appointed in several weeks, will also help develop a broader system to serve defrauded students at other institutions. As part of its campaign, the Department is calling on Congress to strengthen consumer protections for students and accountability for colleges, for example including Department of Defense and Department of Veterans Affairs educational benefits in the 90/10 calculation.

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