The Consumer Financial Protection Bureau (CFPB) and the U.S. Department of Education have taken action against for-profit colleges, most notably Corinthian Colleges. In the past year, the CFPB and the Department of Education cut off Corinthian Colleges’ access to federal loans and it agreed to sell most of its campuses in July 2014. In November 2014, the CFPB and the Department of Education secured $480 million in debt relief for borrowers of the predatory private loans Corinthian offered.

The issue of student loan borrowers and Corinthian Colleges is not over, however. The CFPB and Department of Education settlement relieved students only of the private loans Corinthian Colleges offered, not federal loans. A group of students, at first known as the Corinthian 15 and now expanded to the Corinthian 100, publicly revealed that they will not pay back their federal student loans because of the poor quality education they received from Corinthian. Now, Madigan and Durbin are urging the federal government to forgive the federal student loans of Corinthian students.

“We must protect the victims of the predatory practices of for-profit schools such as Corinthian, which was more concerned with their profits than it was about the quality of education it provided,” Madigan said in a press release this month.

“If colleges fail to hold up their end of the bargain—if they break the law in ways that bear on their students’ educational experience or finances—students should not literally be stuck paying the price,” said Durbin in a joint letter to the Department of Education in December.

Madigan, along with Attorneys General from eight other states, argued that Corinthian Colleges misrepresented their programs, including data on the earnings of graduates, transferability of credits, and the quality of their education programs. Madigan also called on the Department of Education to be more transparent about how students can apply to for loan discharges.

There are several ways direct loans can be cancelled, forgiven, or discharged. They include situations where: the college or university closes; the borrower becomes permanently disabled; the borrower dies; the college or university does not pay back a refund if the borrower withdrew from the school; the student participates in a teacher or public service worker loan forgiveness program; and bankruptcy, but only in rare cases. According to the analysis of the Attorneys General, the Department of Education also has the authority to discharge the federal loans of students harmed by for-profit schools that have been subject to legal action, as is the case with Corinthian Colleges. 

While federal loans offer more repayment and discharge options than private loans, there is still very little opportunity for borrowers to have their loans discharged. The only option within borrowers’ control that does not involve death, disability, or pursuing a specific career is bankruptcy. Unless the Department of Education acts, students who were harmed by Corinthian’s deceptive actions will have few chances to free themselves from student loan debt.  

Woodstock applauds Madigan and Durbin for asking the Department of Education to relieve Corinthian students of debt they received under false premises. A college education should expand the economic security of working adults, but poorly performing for-profit colleges and the debt students incur to attend them end up limiting opportunities. We strongly urge the Department of Education to stand with Corinthian Colleges students and keep them safe from the results of predatory business practices. 

Since this blog was published, Corinthian Colleges closed the rest of its campuses. The Department of Education says that students of the closed campuses may be eligible for federal loan discharge and is also urging Corinthian students to pursue debt relief from their states. Woodstock Institute firmly believes that debt relief should be available to all Corinthian students harmed by its practices, not only the students who attended the closed campuses.