Economy

Corinthian College Students Will Get Loans Forgiven

June 9th 2015

By:
Mike Vainisi

Tens of thousands of students who borrowed money to attend for-profit Corinthian colleges will have their debt forgiven, the Department of Education announced on Monday.

This comes after Corinthian closed its remaining 28 colleges and filed for bankruptcy earlier this year. It was fined $30 million by the Department of Education for defrauding students by using misleading job placement numbers, graduation rates, and attendance figures. Because the company has left its students with debt and often without a degree to show for it, many students had refused to pay back their loans. The colleges were branded under the names Heald, WyoTech, and Everest.

On Monday, Secretary of Education Arne Duncan compared Corinthian's practices to that of payday lenders.

How much will this cost?

The government has issued $3.5 billion in federal student loans to Corinthian students since 2012. This means, technically, if the government collects none of that debt, the bill for taxpayers could be $3.5 billion, although its unlikely that every student will apply for and be granted a discharge, officials have said. Some students, such as those who attended any of the Heald Colleges after 2010 or any who have borrowed since June 20, 2014, can apply for an automatic discharge, while others must demonstrate that Corinthian violated state fraud laws.

It's the government, not Corinthian, who is picking up this bill. So who is at fault?

Critics of the Department's move say that an innocent party -- the government (i.e. taxpayers) -- now has to pay out for Corinthian's wrongdoing.

“Students have been hurt, but the department is establishing a precedent that puts taxpayers on the hook for what a college may have done,” Sen. Lamar Alexander (R-Tenn.) said. “This is one more reason it was a bad idea to make the U.S. Department of Education the banker for students as well as the regulator of their colleges. If your car is a lemon you don’t sue the bank that made the auto loan; you sue the car company.”

But Secretary Duncan thinks Congress has dropped the ball by not regulating the for-profit college industry, which accounts for nearly half of student loan defaults, despite only enrolling about 13 percent of all higher education students.

"You'd have to be made of stone not to feel for these students," Duncan said, according to USA Today. "This has to be a wake-up call to Congress...Congress has to be part of the solution, not part of the problem, and candidly, members on both sides of the aisle have been part of the problem."

Did you attend (or think you might have attended) a Corinthian-owned college?

If you think you attended a Corinthian college, be sure to check out out this fact sheet from the Department of Education. It explains how you can get your money back.

For more on soaring college costs, check out this ATTN: original video:

 
Paying for College in 1978 vs. Paying for College Now

How Much You Need To Work To Cover Tuition in 1978 vs. Now

Posted by ATTN: on Friday, April 3, 2015