More Corinthian Colleges Students’ Federal Loan Debt to Be Erased

(Los Angeles Times/TNS) -

The U.S. Department of Education on Monday announced a series of new debt-relief measures that could assist tens of thousands of students affected by the collapse of Corinthian Colleges Inc.

The provisions may allow thousands more students to wipe out their student debt.

Until now, only 16,000 students — those that attended schools that suddenly closed in April — have been eligible for debt forgiveness. The new policy allows other students to seek debt forgiveness if they believe they were victims of fraudulent marketing and recruiting practices, regardless of when their school closed.

The department also extended loan forgiveness to students whose schools eventually closed, as long as they withdrew after June 20, 2014 — when the Education Department first restricted Corinthian’s access to federal aid.

Students can find more information at studentaid.gov/Corinthian.

The collapse of Santa Ana, Calif.-based Corinthian came after years of federal and state investigations into alleged falsification of student job-placement rates and misleading marketing campaigns. The Education Department called Corinthian’s closure in April “the largest college shutdown in American history.”

Since 2010, nearly 350,000 student borrowers took out about $3.5 billion in federal student loans. But the hit to taxpayers will likely be much lower, because not every student will apply for or receive full relief.

Students must submit paperwork to be eligible for loan forgiveness.

In a conference call with reporters Monday, Education Secretary Arne Duncan said he would demand accountability from for-profit colleges such as Corinthian, because of the risks to students and taxpayers.

“If you defraud students,” he said, “we’ll make sure the full weight of the law is brought to bear.”

Lawmakers and student activists have been pushing since last summer for a provision allowing loan forgiveness in cases of fraud. The department said it will appoint a “special master” to oversee the system.

Former Corinthian students who apply can stop paying their loans until the department resolves their claim. Students must show that the school violated state law in order to have their loans forgiven.

Because potentially hundreds of thousands of former students could apply for such forgiveness, the Education Department said it would work to group as many students together as possible if they attended programs found to be in violation.

For example, Education Department officials found that the vast majority of students who attended Corinthian’s Heald College system between 2010 and 2015 will be eligible for federal loan discharges. In April, the Education Department levied a $30 million fine on Heald, alleging that the schools misstated job-placement rates in at least 947 cases.