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Opinion What the Corinthian Colleges case tells us about student loan relief

Graduates listen to speakers during commencement exercises at the University of Iowa in Iowa City on May 14. (Joseph Cress/AP)

Astra Taylor is the author of numerous books and a co-founder of the Debt Collective, the country’s first union for debtors.

With Wednesday’s announcement that it will erase $5.8 billion in federal student loans owed by an estimated 560,000 former students of Corinthian Colleges Inc., the now-defunct for-profit college chain, the Biden administration has changed many lives. People’s debt-to-income ratios and credit scores will improve; wage and tax garnishments will cease.

But the relief is long overdue. Had it been granted eight years ago when former Corinthian students began to organize, they could have been spared immense financial and emotional hardship. Instead, they had to fight for justice. As the administration considers a broader elimination of student debt, the Corinthian decision offers two lessons: Whatever chunk of debt the government decides to forgive, they should offer it automatically, without an onerous application process, and they should do it now.

I had the honor of organizing alongside these former students as a co-founder of the Debt Collective, a union for debtors. Starting when Barack Obama was still in the Oval Office, I saw firsthand how they pushed multiple administrations for what they deserved, after borrowing to pay for degrees at what turned out to be a predatory institution.

Corinthian was an especially appalling case. By 2014, journalists and public officials, including Kamala D. Harris, then California’s attorney general, had exposed the company’s fraudulent practices: charging sky-high tuition; inflating job-placement statistics; and targeting vulnerable communities with high-pressure marketing techniques. An internal document described Corinthian’s target demographic as “isolated” people with “low self-esteem” who are “unable to see and plan well for the future.”

That year, the Consumer Financial Protection Bureau sued the company for allegedly running an "illegal predatory lending scheme.” The legal case was strong. But instead of protecting students, Obama officials facilitated Corinthian’s sale to a debt collection agency, a move that prevented students from getting the loan cancellation they would have if the school had closed.

It might have been the end of the story. But students fought back.

In May 2014, Nathan Hornes knew something was amiss at Corinthian’s Everest College when his business management classes occasionally entailed playing the board game Monopoly and little else. His misgivings grew when, at his graduation ceremony, a Corinthian employee told students they could participate only if they signed a form that relinquished their right to sue if they couldn’t find employment. Soon after, Nathan applied for a job at Wells Fargo, an investor in Corinthian. He didn’t get it. He went back to working in fast food, now with $68,000 in debt.

Instead of a professional career, Nathan found a vocation. The Debt Collective got in touch with him as he tried to mobilize his fellow students. We joined forces. A class-action lawsuit was off the table; the Corinthian students had signed away their rights to sue the company. But students could hold the Education Department accountable as the regulatory agency and issuer of their federal loans. Debt Collective organizers learned of a largely untested provision of the Higher Education Act called “borrower defense to repayment” that entitles student borrowers to loan relief when their school breaks state law. We collaborated with creative lawyers and built a mobile-phone-friendly website for people to easily submit claims.

Alongside this strategy, we plotted the country’s first student debt strike. Nathan and 14 others called themselves the Corinthian 15 and publicly declared their refusal to pay their loans on the grounds they had been defrauded. The demand was simple: The Department of Education should eliminate all Corinthian debt in one fell swoop, no applications or delays. Other advocates and public officials agreed, including a group of senators led by Elizabeth Warren (D-Mass.). Ultimately, more than 12,000 people used our website to submit claims.

The department credited the movement for pushing it to create its own borrower defense application. But it also doubled down on an onerous, individualized, bureaucratic process, in effect demanding each borrower to prove the fraud, despite reams of evidence. Corinthian students had to do this all while balancing their jobs, caring for children and booking time at local libraries to print the required forms.

Some borrowers saw relief — and then Donald Trump captured the presidency. The Project on Predatory Student Lending filed multiple lawsuits against the Department of Education, arguing that the failure to cancel Corinthian student loan debt was illegal. Under pressure, Education Secretary Betsy DeVos approved discharges for the small number of claims granted by the prior administration. Next to her signature, she wrote: “With extreme displeasure.”

Public officials must learn from these mistakes. Forcing borrowers to individually apply for cancellation guarantees the most vulnerable will struggle to access the relief they are entitled to, putting them at risk should an adversarial president take office. All cancellation should be swift and automatic.

When we launched the Corinthian debt strike, total student debt stood at $1.2 trillion. Now, it exceeds $1.75 trillion. The fate of working-class students who attend so-called traditional institutions is not always so different from victims of predatory for-profit colleges; they, too, are caught in a debt trap. But alongside the rise in student debt, the popularity of canceling it en masse has increased dramatically. Today, a majority of likely voters support student debt cancellation, even those who don’t have student debt themselves.

Yet it’s easy to forget just how quixotic the idea seemed at first. In 2019, a former policy adviser to Warren said that the Corinthian activists made “people more comfortable with the argument that sometimes debt just has to be wiped away.” If President Biden honors his campaign promise and announces some measure of general student debt cancellation in the coming weeks — as he should — a brave group of for-profit debtors will deserve a round of thanks.

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