Federal Government Forgives Corinthian Colleges Student Loans
Last month, we shared a story about Art Institute students requesting student loan forgiveness after many of the for-profit Art Institute locations announced they were shutting down. If your school shuts down, and if your for-profit school’s parent company, the Education Management Corporation, is regularly under investigation for fraud, you shouldn’t have to pay back your student loans, right?
Well, I don’t have an update on the Art Institute story, but I do have an update on another for-profit educational system: Corinthian Colleges. To quote the New York Times:
In a move against what he called “the ethics of payday lending” in higher education, Secretary of Education Arne Duncan announced Monday that the Education Department would forgive the federal loans of tens of thousands of students who attended Corinthian Colleges, a for-profit college company that closed and filed for bankruptcy last month, amid widespread charges of fraud.
In case you’re curious about what that means: Corinthian Colleges worked to attract and enroll predominantly low-income students into its for-profit college system. Admissions representatives used high-pressure sales tactics to persuade students to enroll and take out loans. The college did provide students with coursework and, if the student was able to complete the program, a diploma; however, students often found that both their education and their diploma were of little value in the job market.
Here’s a sample student story from the Huffington Post:
“I said I can’t afford it, I can’t do loans,” [Tasha Courtright] remembered, noting that she was working a minimum-wage job at a gas station when Corinthian first recruited her. “They said, ‘Let us do the numbers.’ They said I qualified for Cal Grants and Pell Grants, and I wouldn’t have to pay anything.”
The recruiter called Courtright repeatedly for two days, pressuring her to make a decision. “They said classes were starting and ‘If you don’t do it now, you never will.’ So I went down again and signed up.” Courtright spent four years at Everest, earning a bachelor’s degree in applied business management. She said recruiters promised she wouldn’t pay a dime; she ended up with $41,000 in student debt.
The HuffPo also notes that another Corinthian student “had an employer at a bank laugh in his face when he said he went to Everest, telling him he would never hire anyone from that school.” (Everest is one of Corinthian Colleges’ many colleges.)
When your school uses high-pressure tactics to recruit you, gives you a sub-standard education, goes bankrupt, closes, and is under charges of fraud, the federal government will forgive your student loans. That’s what it takes. On the plus side, Art Institute students may soon be offered the same forgiveness. Back to the NYT:
Mr. Duncan also said the department planned to develop a process to allow any student—whether from Corinthian or elsewhere—to be forgiven their loans if they had been defrauded by their colleges.
A special master would be appointed within three weeks, department officials said, to create procedures to apply for relief that are “durable, not just for Corinthian but beyond.”
If you’re curious about how private loans factor into this, the Huffington Post has an update. Corinthian pressured many of its students into high-interest private Genesis loans, but the market, as they say, always reaches equilibrium:
The Education Department and CFPB negotiated $480 million in debt relief on private Genesis loans, but most of those loans are in default and have been deemed uncollectible.
I hope someday we see one of those default stories as an op-ed in the New York Times.