A Path 'To Debt Relief' For Defrauded Corinthian Students

Mar 25, 2016
Originally published on April 7, 2016 3:41 pm

U.S. Education Secretary John King announced findings of fraud against 91 separate campuses of the for-profit Corinthian Colleges at a press conference in Boston today.

"Corinthian was more worried about profits than about students' lives," said Secretary King.

The announcement is intended to smooth the way for more former Corinthian students to apply for relief of their student loans. Corinthian had over 70,000 students when it ceased operations in 2014, and some 350,000 since 2010. So far just 8,800 have had their loans discharged. That's according to a new report by the Department of Education's Special Master in charge of reviewing borrower defense claims.

Despite the findings of fraud, and numerous legal actions taken by state attorneys general, the DOE continues to collect student loans taken out by Corinthian students. Current regulations require that former students of these colleges fill out forms and apply individually for relief of their loans. Student advocates would like to see the process streamlined considerably.

"Everyone is still in debt, and the DOE and its servicers are still collecting," said Laura Hanna of Debt Collective, which has organized Corinthian students in a "debt strike".

"The Debt Collective urges the DOE to stop wasting taxpayer dollars trying
to collect fraudulent debt from those who attempted to get an education. We
instead encourage the department to pursue collections on investors of
for-profit scam schools."

According to ProPublica, a lawsuit filed by California Attorney General Kamala Harris alleges Corinthian actively recruited homeless students and advertised programs that they didn't offer. This week, a judge in California ordered the colleges to pay $1.1 billion in damages, including repaying $800 million to students, but given that the company is in bankruptcy, restitution for students by this means is unlikely.

And according to Barmak Nassirian, who's a federal student aid expert at the American Association of State Colleges and Universities, this is all too little, too late.

"We waited for them to commit the fraud, to cash the check, to go out of business and even then it took us almost a year to finally admit, 'Oh, I think there might have been some fraud going on here,'" he said.

He's encouraged by the announcement, but also says Corinthian executives should be held accountable.

"The people who did this are multimillionaires and not a dime will be recovered from them."

Nassirian points out other for-profit colleges, though certainly not all, are engaging in similar behavior. "Triage after the disaster only goes so far to prevent future disasters," he said.

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AUDIE CORNISH, HOST:

It's a good day for thousands of students who had attended the now-defunct Corinthian Colleges. The U.S. Department of Education announced that students who attended its campuses can apply to have their student loans forgiven. The department uncovered fraud by Corinthian, which had been the nation's largest for-profit college before filing for bankruptcy last spring. Kirk Carapezza of member station WGBH reports.

KIRK CARAPEZZA, BYLINE: Shalaan Williams of Dorchester has waited a long time for today's news that her loans will be forgiven.

SHALAAN WILLIAMS: Thank you, God. Oh, my goodness (laughter). I can finally laugh again (laughter).

CARAPEZZA: Williams enrolled at Corinthian's Everest Institute in Boston four years ago after seeing ads on TV.

WILLIAMS: The little simple commercials, and they tell you, oh, pick up the phone. You're sitting on the couch anyways.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED MAN: And your life's passing you by.

WILLIAMS: And I just picked up the phone and called them.

CARAPEZZA: On campus, Williams says Corinthian recruiters lied about job placement rates and convinced her to take out $21,000 in federal student loans for a medical assistant certificate. She's working now, but upon graduation, she couldn't find a job at one of Boston's many hospitals.

WILLIAMS: I had no money at all. I had a brand-new baby. As soon as I graduate, my son was two months old. Like, I didn't have any extra money to pay these bills, so basically my student loans were delinquent as soon as they hit.

CARAPEZZA: Today, the Education Department announced Williams and thousands of other students won't have to pay back those loans. So far, the department has approved the loan discharges for 8,800 Corinthian students nationwide. And Secretary John King says many more are now eligible.

(SOUNDBITE OF ARCHIVED RECORDING)

JOHN KING: When Americans invest their time, their money, their energy, they have a right to expect that they will graduate with a high-quality degree that will allow them to be competitive in the 21st century economy.

CARAPEZZA: The department predicts loan forgiveness for those eligible could take a while, but he says it will eventually happen.

(SOUNDBITE OF ARCHIVED RECORDING)

KING: Unfortunately, we have institutions, like Corinthian, that have been motivated more by profit than by the interest of students.

CARAPEZZA: Nearly two years ago, the Education Department stopped funding Corinthian after the for-profit giant admitted it had fudged its job placement figures. Corinthian collapsed, and taxpayers were left holding the bag. A recent investigation by California's attorney general found Corinthian targeted homeless people and then helped them get loans they couldn't pay back.

BARMAK NASSIRIAN: We have allowed some of our most vulnerable people to get ripped off and saddled with debt for life.

CARAPEZZA: That's Barmak Nassirian. He's a federal student aid expert at the American Association of State Colleges and Universities. Nassirian is encouraged by today's announcement, even though he thinks it's too little, too late.

NASSIRIAN: We waited for them to commit the fraud, to cash the checks, to go out of business. And even then, it took us almost a year to finally admit, oh, I think they're might have been some fraud going on here.

CARAPEZZA: Nassirian says Corinthian executives should be held accountable.

NASSIRIAN: The people who did this are multimillionaires, and not a dime will be recovered from them.

CARAPEZZA: Nassirian points out Corinthian isn't alone. Some, but certainly not all for-profit colleges, are engaging in similar behavior. And he says triage after the disaster only goes so far to prevent future disasters. For NPR News, I'm Kirk Carapezza in Boston. Transcript provided by NPR, Copyright NPR.