The findings are similar to ones that led the department to levy a $30 million fine against Corinthian last year for falsifying job rates at Heald Colleges in California, Hawaii and Oregon. Students at those Heald schools seeking loan forgiveness in the aftermath of Corinthian’s demise can have their claims grouped together to speed the process.
Department officials plan to notify former students through mailers, email, partner organizations and other means.
“When Americans invest their time, their money, their energy, they have a right to expect that they will graduate with a high quality degree that will allow them to be competitive,” Education Secretary John B. King said, at a press conference in Boston Friday. “Unfortunately, we have institutions like Corinthian that have been motivated more by profit than by the interests of students.”
Charges that Corinthian lied about the success of its programs ultimately led to the loss of its access to federal funding and its bankruptcy. The company’s implosion left thousands of students unsure of what to do with their debt or even where to complete their educations.
Lawmakers and advocacy groups have criticized the department for its handling of Corinthian’s collapse. Many say it is taking too long for the government to clear the debts of former students of a chain toppled by evidence of pervasive fraud. While critics are demanding collective debt relief, the government is sorting through thousands of individual claims.
“The pace of relief for wronged Corinthian students…remains far too slow, and its scope frustratingly narrow,” said Alexis Goldstein, senior policy analyst at the progressive Americans for Financial Reform. She pointed out that only students who took out loans after July 2010 are eligible for debt cancellation, which excludes borrowers with old bank-based federal student loans.
Goldstein added: “With each passing day, more evidence accumulates that the illegal acts the department and others documented in their Corinthian enforcement actions were endemic throughout the entire chain. But nonetheless, interest is still accumulating on the federal student loans held by hundreds of thousands of former Corinthian students who have not yet received relief.”
By law, students can apply to have their federal loans discharged if they can prove a school used illegal or deceptive tactics in violation of state law to persuade them to borrow money for college. The process, known as a “borrower defense to repayment claim,” has rarely been used and is widely considered to be difficult to navigate.
To streamline the process, the department appointed an independent monitor, Joseph A. Smith, who has been working with state attorneys general to identify wrongdoing that could give former Corinthian students a basis for relief.
On Friday, Smith delivered his third progress report that said the department has approved discharges for more than 8,800 former Corinthian students, totaling more than $130 million. Of that amount, $42.3 million is related to defense claims from 2,048 borrowers. Nearly 600 Heald students have been granted relief to the tune of $10.3 million. Another 190 Everest and WyoTech students have been approved for $4.1 million in relief.
Anyone who attended a Corinthian school as of June 20, 2014, can apply for what’s known as a closed-school discharge of their federal loans. As of the beginning of March, the department has processed 6,838 closed school claims to forgive more than $90 million in federal student loans, according to Smith’s report.
Smith said there are still 8,952 open defense claims that need to be resolved. Corinthian students borrowed about $3.2 billion in federal loans since 2010, and the department is no closer to knowing how much loan forgiveness will ultimately cost.
Friday’s announcement arrives a week after the department wrapped up its final round of meetings to revise the rules governing defense claims. Negotiators on the rule-making panel failed to reach an agreement on the litany of proposals to reshape the loan forgiveness process. They could not come to a consensus on proposals to restrict mandatory arbitration agreements or implement statuettes of limitations on claims. That means the department can proceed with its own plan to revise the rules.
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