A contingent of former Corinthian Colleges Inc. students, backed by student advocates and more than a dozen Senate Democrats, has demanded that the U.S. Department of Education forgive thousands of federal student loans taken out by Corinthian students.
Former Corinthian student Latonya Suggs, who lives in Cincinnati, and 14 other former Corinthian students announced this week that they will not repay any federal student loans they took out to attend Corinthian's schools.
Suggs in November told two of the federal government's top education officials that the Education Department had failed her. A month earlier, she graduated from Everest University, a for-profit college, with a degree in criminal justice. Her online program, one of many owned by Corinthian, left her with more than $70,000 in student loan debt. She hoped the degree would lead to a career as a probation officer but she could only find work as a hotel housekeeper, she told Education Undersecretary Ted Mitchell and Deputy Assistant Secretary Lynn Mahaffie, according to a transcript of the event. Suggs is unemployed.Corinthian, formerly one of the nation's largest for-profit college chains with more than 110,000 students, is shutting down under the weight of numerous state and federal probes that allege it cheated students by lying to them about job placement and graduation rates.
Last week, Massachusetts Attorney General Maura Healey asked the Education Department to forgive the school loans of hundreds of students from her state.
The chain previously disputed allegations from state and federal authorities that it defrauded students. Recently it sold more than 50 campuses under pressure from the Education Department. Canadian authorities last week forced another 14 campuses into bankruptcy.
The Education Department has the authority to cancel loans in cases where students show that schools defrauded them. Lawyers from the Department of Justice have argued that Education Secretary Arne Duncan has "complete discretion" when it comes to canceling loans for all students at a particular institution if he determines it defrauded students, even absent a formal application from borrowers.
But in Corinthians case, the Education Department has thus far avoided forgiving any taxpayer-backed debt incurred by current and former Corinthian students. "The Department of Education allowed this to happen," Suggs said Monday about her experience at Everest and subsequent struggle to find work. "It's their responsibility to make sure these schools hold up their end of the bargain. If they kept up their promises, I'd pay it back. But they haven't done anything, so why should I pay?"
Suggs and the 14 other former students argue that since the Education Department should've known Corinthian students would have difficulty repaying their loans, they shouldn't be held responsible when the loans came due. By giving Corinthian the ability to tap federal student aid, the Education Department - rather than students - should be on the hook for loan defaults, the group says.
The Consumer Financial Protection Bureau, after a multi-year investigation, accused Corinthian in September of inflating its job placement rates by creating fake companies, defining a "career" as a job that lasted one day with the promise of a second and by paying employers to temporarily hire its graduates.
A month earlier, the CFPB had accused the company of violating the Fair Debt Collection Practices Act and the Dodd-Frank Act.
Even after the Education Department struck a deal last July with the company that called for it to dismantle, the department allegedly originated more than $253 million in federal loans for students attending Corinthian campuses during the six-month period ending Dec. 31, department data show. More than $156 million in federal grants were disbursed to Corinthian students. Federal student aid money inevitably flowed to Corinthian in the form of tuition and fees, according to a report in the Huffington Post.
In other words, despite Education Department concerns that Corinthian was misleading its students, taxpayers continued to subsidize the company and enrich its executives through hundreds of millions of dollars in federal student aid.