Hundreds of thousands of students attending a chain of for-profit Corinthian colleges will automatically have their federal student loans canceled, the Biden administration announced Wednesday, a move aimed at solving one of the most notorious cases of fraud in American higher education. have to close.
Under the new action, anyone involved in the now-defunct chain from its founding in 1995 to its collapse in 2015 will have their federal student loans cleared. According to the agency, it would wipe out $5.8 billion in debt for more than 560,000 borrowers, the largest single debt discharge in Education Department history.
“To this day, every student who has been duped, defrauded and in 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 too long, Corinthians engaged in the wholesale financial exploitation of students, misleading them into taking on more and more debt to pay off promises they would never keep.”
Thousands of East Corinthian students were already eligible for loan cancellation, but 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.
Education Department officials said those who have balances on their Corinthian loans will also get refunds on payments already made. But the action does not apply to loans that have already been paid in full.
At its peak, Corinthian was one of the largest for-profit college companies in the country, with more than 100 campuses across the country and more than 110,000 students in its Everest, Vyotek, and Heald schools.
But the company shut down in 2015 amid widespread findings of fraud. The Obama administration – working with Kamala Harris, who was then California’s attorney general and later vice president – found that many campuses were falsifying data on the success of their graduates. In some cases, schools reported that students had found jobs in their field of study, whether they were working in grocery stores or fast-food chains.
Hundreds of students told investigators that they were pressured to enroll with the promise of lucrative employment, only to end up with a huge debt and few job prospects. Federal officials also found that the company falsely told students that their course credits could be transferred to other colleges.
The case prompted 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. The administration expanded a process known as borrower defense to repayment, which allows any fraudulent student to apply for loan cancellation.
But the political battle over the process, along with an explosion in loan waiver applications, has created a years-long backlog in the process, leaving many East Corinthian students still awaiting relief.
As of December, the Department of Education reported that it had more than 109,000 pending applications from students accused of fraud by their colleges, including several Corinthian students. Borrowers and their advocates are urging the government to erase all Corinthian loans, saying the evidence of misconduct was so widespread that all of the students in the chain were victims of fraud.
The administration announced the action on Wednesday as President Joe Biden considers comprehensive student loan forgiveness for millions of Americans. As a candidate, Biden said he supports forgiving $10,000 in student loans for all borrowers. He later indicated that such action should be through Congress, but the White House has said it is considering whether to pursue it through executive action.
Advocates said the Biden administration’s decision brings long-delayed justice.
“This is a tremendous student victory, and it concerns the thousands of borrowers who were defrauded and abused by Corinthian colleges,” said Eileen Connor, director of the Project on Predatory Student Lending, which represents Corinthian students in lawsuits. has done. “They didn’t stop fighting more than three administrations – for the justice they deserve under the law.”
Libby DeBlasio Webster, senior counsel for the advocacy group Student Defense, said the news gives Corinthian alumni a “fresh start,” but added that many fraudulent students from other for-profit colleges are still waiting for help.
“We also hope that today’s news is an indication that other decisions are on the horizon for the thousands of similar situation students who are waiting for such relief,” she said.