Education Department to Forgive Debt of Former Corinthian Colleges Students

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Thousands of students who were defrauded by Corinthian Colleges, the shuttered for-profit provider that oversaw hundreds of campuses across the country, could receive billions in debt forgiveness from the federal government, the U.S. Department of Education announced Friday.

Corinthian Colleges filed for bankruptcy and closed campuses earlier this year after the Consumer Financial Protection Bureau and state attorneys general from 20 states sued the school for making false and misleading advertisements to entice students to enroll and take out loans to cover the costs. In total, the Education Department has made findings of fraud against more than 100 of Corinthian's campuses. Friday's announcement provides a path to student loan forgiveness for students who attended Corinthian schools operated under its Everest and WyoTech brands – 91 schools in total across 20 states. In June 2015, the department said the total cost to taxpayers could be up to $3.5 billion if all 350,000 of the former students apply.

"When Americans invest their time, money and effort to gain new skills, they have a right to expect they'll get an education that leads to a better life for them and their families," Secretary of Education John King said. "Corinthian was more worried about profits than about students' lives." Last October, a federal judge in Illinois ruled that Corinthian must pay $531 million in damages to former students for misleading them about their career prospects and engaging in other deceptive practices.

Corinthian, which once operated more than 120 schools with more than 110,000 students across North America under the Everest, Wyotech and Heald brands, filed for bankruptcy in May 2015 in the largest failure of a college chain in U.S. history. Eleven state Attorneys General that month sent a letter to Department of Education Secretary Arne Duncan expressing concerns about information provided to students affected by the sudden closure of 28 colleges operated by Corinthian.

The letter urged the Education Department to provide debt relief to students who do not qualify for a "closed school" discharge but were harmed by misconduct by the school. The letter asserted that such students should be permitted to raise Corinthian’s misconduct as a defense to repayment of their student loans. The letter further urges the Education Department to provide clear guidance to students on how to assert a claim for relief. The letter was co-signed by the Attorneys General of Connecticut, Hawaii, Illinois, Kentucky, Maine, Maryland, Minnesota, Missouri, New Mexico, New York and Oregon.

In February 2015, the government struck a deal with ECMC Group, allowing the student debt guarantor to acquire some of Corinthian's campuses. ECMC agreed to wipe out $480 million in debt to avoid any liability for Corinthian's alleged illegal activity. Collections & Credit Risk first reported about a possible deal in November 2014.

Corinthian then announced in April 2015 the closing of its remaining 28 campuses. The closing marked a quick end to what had been a steady dismantling of one of the country’s largest for-profit schools. It impacted approximately 16,000 students nationwide.