Feds are wrongly sending debt collectors after ex-Corinthian students, Elizabeth Warren says

Sen. Elizabeth Warren accused the Education Department on Thursday of moving forward with debt collection against nearly 80,000 former students of Corinthian Colleges, despite federal and state findings that the now-defunct for-profit chain defrauded students.

The Massachusetts Democrat sent a letter to Education Secretary John B. King Jr. reporting the findings of an investigation by members of her staff. “It is unconscionable that instead of helping these borrowers, vast numbers of Corinthian victims are currently being hounded by the department's debt collectors,” she said.

The seven-page letter described the department's approach as backward.

In response, King said, “Some of those students attended programs where there were findings of fraud. Others did not.”

King said the department would keep making sure Corinthian borrowers know what their options are for student loan forgiveness. He was asked about Warren’s letter during a briefing with reporters after a meeting at the White House with President Obama to discuss efforts to make college more affordable.

In her letter, Warren asked the department to immediately halt all collections on Corinthian students' debt and discharge their federal loans.

Warren said the debt collection has resulted in “many having their credit slammed, their tax refunds seized, their Social Security and earned income tax credit payments reduced, or their wages garnished — all to pay fraudulent debts that are likely eligible for discharge.”

Her staff's investigation found that about 30,000 Corinthian borrowers are having their tax refunds, tax credits or other government benefits like Social Security seized in order to pay off their debts. Wages are being garnished for more than 4,000 of these borrowers, the letter said.

Corinthian Colleges, one of the largest chains of for-profit colleges, filed for bankruptcy protection last year, closing schools and leaving thousands of students with frustrated efforts to earn degrees and mountains of financial debt.

A whistleblower raised concerns about Corinthian in early 2011, alleging that employees of Corinthian fabricated employers to make it appear as though unemployed graduates had secured good jobs in their careers of study. California's attorney general filed a lawsuit in 2013, alleging rampant lies to students about job placement.

In June 2015, the department appointed a special master to help guide and oversee the loan forgiveness process for Corinthian students.

According to the most recent report from the department, it has received more than 23,000 Corinthian claims for “borrower defense” relief, where students allege they were defrauded by the school. Of those, about 3,800 have been approved for discharge, totaling more than $73 million.

An additional 12,000 applications have been submitted because their Corinthian schools closed, with about 7,300 approved worth $97 million. It's all just a small fraction of the estimated $3.6 billion in federal loans given to Corinthian students. 

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