The U.S. Department of Education on Monday announced a series of debt relief measures that could assist tens of thousands of students affected by the collapse of Santa Ana-based Corinthian Colleges Inc.
The provisions could allow many more students to wipe out federal loan debt tied to the for-profit college chain, but questions remain about how many students will apply — and how many will be approved.
Until now, only about 16,000 students — those that attended schools that suddenly closed in April — have been eligible for debt forgiveness. The new policy allows other students to seek debt forgiveness if they believe that they were victims of fraudulent marketing and recruiting practices.
The Education Department also extended loan forgiveness to students whose schools eventually closed, as long as they withdrew after June 20, 2014 — the day that Corinthian announced the department had restricted its access to federal aid.
Corinthian's collapse came after years of federal and state investigations into alleged falsification of student job-placement rates and misleading marketing campaigns. The Education Department called Corinthian's closure in April “the largest college shutdown in American history.”
Education Department officials said the goal was to balance the interests of students and taxpayers. To get a sense of the federal government's investment in Corinthian, consider this: Since 2010, the company enrolled nearly 350,000 students who took out federal loans worth about $3.5 billion.
In a conference call with reporters Monday, Education Secretary Arne Duncan said any estimates of taxpayer exposure would be speculative at this point.
“We really don't know how many students will apply for this,” Duncan said.
Lawmakers, state attorneys general and student activists have been pushing since last summer for a provision allowing loan forgiveness in cases of fraud. The Education Department said it would appoint a “special master” to oversee the system.
Former Corinthian students who apply can stop paying their loans until the department resolves their claim. Students must show the school violated state law to have their loans forgiven.
Because potentially hundreds of thousands of former students could apply for such forgiveness, the Education Department said it would work to group as many students together as possible if they attended programs found to be in violation.
For example, Education Department officials found that the vast majority of students who attended Corinthian's Heald College system between 2010 and 2015 would be eligible for federal loan discharges because of misleading job-placement numbers. In April, the Education Department levied a $30-million fine on Heald, alleging that the college misstated job-placement rates in more than 80% of its programs.
The department estimated that as many as 40,000 former Heald students could have up to $544 million in federal loans erased. Students can find more information at studentaid.gov/Corinthian.
Duncan said he would demand accountability from for-profit colleges such as Corinthian because of the risks to students and taxpayers.
“If you defraud students,” he said, “we'll make sure the full weight of the law is brought to bear.”