Too Little Debt Relief for Corinthian Students
Since our blog post of last July, our request that the U.S. Department of Education provide significant debt relief to Corinthian students has gone unheeded. Instead, despite its own finding that Corinthian deceived students by falsifying placement rates, the Department has kept this unscrupulous company on financial life support. It allowed Corinthian to continue to recruit and enroll new students, but did not require Corinthian to correct its placement rates or cease the deceptive practices revealed by the Consumer Financial Protection Bureau and the California, Massachusetts, and Wisconsin attorneys general. Now the Department is supporting the proposed acquisition of 56 Corinthian campuses by ECMC Group, a company known for its “ruthless” federal student loan debt collection tactics.
This sale is a risky experiment that could cost current and future students, as well as taxpayers, millions if it fails. ECMC has no experience operating an educational institution. How can it possibly turn around a failing institution offering substandard programs to over 40,000 students? Are these programs even worth saving? Would it not be in the best interest of students, their communities, and taxpayers to allow students to discharge their loans and start over at schools better suited to provide a quality education? Is this the precedent the Department wants to set for large failing for-profit institutions that have engaged in fraud?
The proposed sale to ECMC provides for very little student debt relief. If the sale happens:
- Corinthian will pay off only $3.8 million in the predatory institutional loans it made to students (called Genesis loans). This amount is tiny in comparison to the more than $500 million of loans still owed by borrowers who are likely to experience aggressive debt collection tactics for years to come, even though many of them have defenses to repayment based on Corinthian’s misconduct.
- Only a limited number of students in certain business, criminal justice, and paralegal programs will have the option to withdraw and receive a full refund. The vast majority of Corinthian’s students may withdraw, but do not have any refund rights beyond the limited rights already provided by law.
- Students will not be eligible for a closed school discharge of their federal loans, even if ECMC discontinues their programs.
Fortunately, this is not yet a done deal. The Department can still provide relief to Corinthian students who received inflated placement rates or who were subjected to other illegal recruitment practices. The Higher Education Act provides the Department with the authority to specify “acts or omissions of an institution of higher education a borrower may assert as a defense to repayment of a loan.” We urge the Department to use this authority to:
- In the states where the attorneys general have evidence that Corinthian violated state laws, cancel the loans for students who enrolled during the periods covered by the evidence; and
- Create a simple process by which other students may submit claims to cancel their loans, without imposing difficult evidentiary burdens on students.
Students may learn more about their options from the California Attorney General’s interactive website. In addition, students who would like to share their story may do so on our website or at Higher Ed Not Debt‘s Corinthian website.
Posted on 10 December 2014