The Washington PostDemocracy Dies in Darkness

Education Dept. to clear $5.8B in debt of Corinthian Colleges students

The move marks the largest group discharge of federal student loans

Education Secretary Miguel Cardona speaks at the White House on April 27. The Biden administration says it will forgive all remaining federal student debt for former students of the for-profit Corinthian Colleges chain. (Susan Walsh/AP)

In the Education Department’s largest group cancellation of federal student loans, the Biden administration will forgive $5.8 billion in debt held by 560,000 former students of the defunct for-profit chain Corinthian Colleges, the department said Wednesday.

The decision covers people who were enrolled in Corinthian schools — Everest Institute, WyoTech and Heald College — from its founding in 1995 to its closure in 2015. Former students are not required to submit an application and will receive a letter from the Education Department informing them of the pending discharge.

“As of today, every student deceived, defrauded, and driven into debt by Corinthian Colleges can rest assured that the Biden-Harris Administration has their back and will discharge their federal student loans,” Education Secretary Miguel Cardona said in a news release. “For far too long, Corinthian engaged in the wholesale financial exploitation of students, misleading them into taking on more and more debt to pay for promises they would never keep.”

Vice President Harris, who played an instrumental role in the investigation of Corinthian as California attorney general, is scheduled to join Cardona at the department on Thursday for remarks about the announcement.

Corinthian was once a giant in the for-profit sector, enrolling more than 110,000 students at 105 campuses at its peak in 2010. But the company became the poster child for the worst practices in the sector, with high loan defaults and dubious programs. Clouded by allegations of deceptive marketing and lying to the government about its graduation rates, Corinthian lost its access to federal funds in 2014, forcing the company to sell or close its schools.

The Washington Post Co., and later Graham Holdings, once had a minority stake in Corinthian.

As the chain imploded, 15 Corinthian students teamed with the Debt Collective, an offshoot of the Occupy Wall Street movement, to petition the Education Department to wipe away debt they say the school pressured them into taking.

The group asserted that a little-known statute called “borrower defense to repayment” gave the agency broad authority to cancel federal student loans when colleges violate students’ rights and state law. Based on the findings of the department and state attorneys general, Corinthian fit the bill — yet the Obama administration was slow to act.

After months of pleading with the Education Department to forgive the loans, the Corinthian 15 went on strike in 2015, refusing to repay their debt in protest.

“When we launched this strike, we had no idea what we were doing. We just knew we had to do something,” Nathan Hornes, one of the Corinthian 15 who attended Everest College in Ontario, Calif., said Wednesday. “We were called entitled spoiled brats … but Corinthian preyed on us. The government let us down, and we had to act.”

Hornes graduated with a business degree and $70,000 in student loans from Everest in 2014. Halfway through his program, he tried to transfer to another school out of frustration with the haphazard instruction. But no one would accept his credits from Everest and Hornes said he felt trapped. After graduation, he struggled to find employers who recognized his degree.

As the Corinthian 15 protest grew, so did the number of borrower defense claims submitted to the department.

Latest White House plan would forgive $10,000 in student debt per borrower

At the time, the claims process had only been used a few times since it was enacted in 1995 and the department had to appoint an independent monitor to hammer out the details of the process. Harris’s investigation into Corinthian served as the basis for the department canceling the loans of former students in California and Florida.

The Obama administration ultimately approved thousands of claims before leaving office, but scores of applications languished at the department for years. The Trump administration tried to limit and delay loan cancellations, leading to lawsuits involving Corinthian and other students of for-profit colleges.

Some of those cases yielded forgiveness for borrowers, but others remain ongoing. Wednesday’s announcement should put them to rest. Still, there are tens of thousands of debt relief claims from people who attended other for-profit schools that have yet to be resolved.

“It is extremely remarkable to have achieved this outcome,” said Eileen Connor, director of the Project on Predatory Student Lending, a group that has represented borrowers in several borrower defense to repayment lawsuits. “This will reduce the backlog of claims, but it certainly doesn’t wipe it out. There’s still a lot of work to do.

With Wednesday’s announcement, the Biden administration has now approved $25 billion in loan forgiveness to 1.3 million borrowers. Still, activists and liberal lawmakers are clamoring for the president to fulfill a campaign promise to grant some form of widespread forgiveness to the 45 million people with $1.6 trillion in federal student loans.

The Washington Post has reported that White House officials are planning to cancel $10,000 in student debt per borrower for Americans who earned less than $150,000 in the previous year, or less than $300,000 for married couples filing jointly. On Wednesday, the Education Department said no final decision has been made.

Thomas Gokey, a founder of the Debt Collective, said there is a direct line from the Corinthian 15 to the prospect of broad debt cancellation. Their strike captured the attention of lawmakers, including Sen. Elizabeth Warren (D-Mass.), who helped champion forgiveness and sparked a movement.

“It was these students who started to remake the world,” Gokey said of the Corinthian 15. “The strike and the continued organizing has achieved a lot more than people gave us credit for, and we’re just getting started.”

Loading...