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Obama administration has forgiven $171 million owed by former Corinthian students

Corinthian Colleges
Students wait outside Everest College in Industry last year, hoping to get their transcripts and information on loan forgiveness and transferring credits to other schools.
(Christine Armario / Associated Press)

The U.S. Department of Education has agreed to forgive $171 million of debt owed by former students of the bankrupt for-profit school Corinthian Colleges Inc., most of them in California.

The government said Wednesday that it has granted relief to 11,173 students who attended one of the defunct Santa Ana company’s colleges, which included Heald, Everest and WyoTech.

Of the students who have filed claims, nearly 9,700 reside in California -- far more than in any other state –  according to a report released Wednesday by the official overseeing the claims. The average amount of relief per student was $15,280.

The number of students receiving debt relief -- and the bill for taxpayers -- probably will rise as government investigators continue to look at thousands of other students’ claims.

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In May 2015, Corinthian filed for bankruptcy, a week after abruptly closing the doors of its remaining campuses. 

The company was one of many that opened for-profit campuses across the country, often with few admissions requirements. Corinthian made it easy for students to apply for federal loans to cover its high tuition, with many accumulating debt in the tens of thousands of dollars.

But Corinthian was repeatedly found to have overstated the success of its education programs, including the numbers of students obtaining jobs that paid enough for them to pay back the debt and make a living.

For example, in March, a San Francisco County Superior Court judge found that Corinthian had provided untrue or misleading statements about graduates’ job placement rates.

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The judge ordered Corinthian to pay $820 million to students -- a sum that will be hard to collect. When the company filed for bankruptcy it listed $143 million in liabilities and just $19 million in assets.

Even with Wednesday’s announcement, many students who believe they were defrauded will continue to wait. The government is only looking at claims of students who took out a loan in 2010 or more recently.

Tasha Rincon, 34, of Vista said she owes more than $46,000 for her classes at an Everest campus in Ontario. She said Wednesday that she’s happy for the students getting relief, but doesn’t know if she’ll ever get help since she took out her first loan before 2010.

Rincon said she took classes to be a probation officer, but could only find work as a security guard, which paid minimum wage.

She now works three hours a day serving lunch in a high school.

Rincon said that Corinthian had told her that 93% of students in the probation officer program would get well-paying jobs.

“The numbers just sounded great,” she said.

Since 2010, Corinthian enrolled nearly 350,000 students who took out about $3.5 billion in federal loans.

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The government is forgiving the loans under a federal law known as “borrower defense,” which relieves the debt of those who can prove they were defrauded. The law also forgives the loans of students who attend schools that close before they get their degree. 

melody.petersen@latimes.com

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