Department of Education takes steps to provide debt relief for Corinthian borrowers, but falls short

Woodstock Institute has called for the Department of Education to provide debt relief for students of Corinthian Colleges, which recently went out of business after the Department of Education took action against the chain for misrepresenting its programs and failing to comply with federal aid regulations. The Department of Education announced Monday that it would make changes to the program to enable more students who attended Corinthian Colleges to cancel their student loan debts. 

The Department will:

  • Give borrowers who withdrew on or after June 20, 2014 from a school that closed the opportunity to discharge their debts.
  • Cancel the debt of borrowers who attended certain Heald College campuses and programs if students apply for relief.
  • Provide loan forbearance and suspend collection efforts for Corinthian borrowers who applied, or intend to apply in the next twelve months, for debt relief because their school violated state consumer-fraud laws.
  • Appoint a Special Master to develop a “streamlined” process for Corinthian borrowers who did not attend schools that closed and are seeking debt relief because their schools violated state consumer-fraud law, as well as broader processes for non-Corinthian borrowers seeking debt relief.

“We applaud the Department of Education for recognizing that its existing debt relief options for Corinthian borrowers were not sufficient and taking steps to expand borrowers’ options,” said Katie Buitrago, senior policy and communications associate at Woodstock Institute. “This is particularly crucial for Illinois students who attended Everest Colleges, since those schools were sold to a new owner and did not close.”

“We are concerned, however, that Corinthian borrowers have to apply individually for relief.  Typically, only a small fractions of students eligible for relief end up applying, and so we urge the Department to automatically grant relief to Corinthian borrowers who attended a school that closed or a school that authorities have found to have violated state consumer-fraud laws.  The Department should also simplify the process so that students don’t need a lawyer to help them through it.  Finally, the Department must ensure that loan servicers provide borrowers with accurate information about the options for loan relief.  These measures will help Corinthian borrowers start fresh, without the burden of excessive debt from a poor-quality education.”

For more information, please contact Katie Buitrago at 312-368-0310 or kbuitrago@woodstockinst.org.